SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT
OF 1934)
DELMARVA POWER & LIGHT COMPANY
(NAME OF THE ISSUER AND PERSON(S) FILING STATEMENT)
3.70% Preferred Stock
4% Preferred Stock
4.20% Preferred Stock
4.28% Preferred Stock
4.56% Preferred Stock
5% Preferred Stock
6 3/4% Preferred Stock
7 3/4% Preferred Stock -- $25 Par
Adjustable Rate Preferred Stock, Series A
(TITLE OF CLASS OF SECURITIES)
247109 200 (3.70% Preferred Stock)
247109 309 ( 4% Preferred Stock)
247109 408 (4.20% Preferred Stock)
247109 507 (4.28% Preferred Stock)
247109 606 (4.56% Preferred Stock)
247109 705 ( 5% Preferred Stock)
247109 770 (6 3/4% Preferred Stock)
247109 788 (7 3/4% Preferred Stock -- $25 Par)
247109 820 Adjustable Rate Preferred Stock, Series A
(CUSIP NUMBER OF CLASS OF SECURITIES)
Barbara S. Graham
Senior Vice President, Treasurer and Chief Financial Officer
800 King Street
P.O. Box 231
Wilmington, Delaware 19899
(302) 429-3448
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S)
FILING STATEMENT)
August 22, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY
HOLDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
--------------------- --------------------
$102,585,775 $20,517
* Pursuant to Section 13(e)(3) of the Securities Exchange Act
of 1934, as amended, and Rule 0-11(b)(1) thereunder, the
transaction value was calculated by multiplying 50,000
shares of 3.70% Preferred Stock, 40,000 shares of 4%
Preferred Stock, 50,000 shares of 4.20% Preferred Stock,
50,000 shares of 4.28% Preferred Stock, 50,000 shares of
4.56% Preferred Stock, 80,000 shares of 5% Preferred Stock,
200,000 shares of 6 3/4% Preferred Stock, 1,600,000 shares
of 7 3/4% Preferred Stock -- $25 Par and 160,850 shares of
Adjustable Rate Preferred Stock, Series A, by $58.36,
$60.88, $66.25, $67.51, $71.92, $78.86, $104.65, $28.12 and
$91.50, the respective per share purchase prices.
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY
RULE 0-11(A)(2) AND IDENTIFY THE FILING WITH WHICH THE
OFFSETTING FEE WAS PREVIOUSLY PAID. IDENTIFY THE PREVIOUS
FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR
SCHEDULE, AND THE DATE OF ITS FILING.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
Page 1 of 5 Pages
<PAGE>
EXPLANATORY NOTE
Copies of the Offer to Purchase and each Letter of
Transmittal, among other documents, have been filed by Delmarva
Power & Light Company, a Delaware and Virginia corporation (the
"Company"), as Exhibits to this Issuer Tender Offer Statement on
Schedule 13E-4 (the "Statement"). Unless otherwise indicated,
all material incorporated by reference in this Statement in
response to items or sub-items of this Statement is incorporated
by reference to the corresponding caption in the Offer to
Purchase, including the information stated under such captions as
being incorporated in response thereto.
ITEM 1. Security and Issuer.
(a) The name of the issuer is Delmarva Power & Light
Company, a Delaware and Virginia corporation that has
its principal executive offices at 800 King Street,
P.O. Box 231, Wilmington, Delaware 19899 (telephone
number (302) 429-3011).
(b) The information set forth in the front cover page, the
"Introduction," Section 1-"Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company
After the Offer" and Section 11 - "Transactions and
Agreements Concerning the Shares" in the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 8 - "Price Ranges
of Shares; Dividends" in the Offer to Purchase is
incorporated herein by reference.
(d) Not applicable.
ITEM 2. Source and Amount of Funds.
(a)-(b) The information set forth in Section 9 "Certain
Information Concerning the Company" and Section 10 -
"Source and Amount of Funds" in the Offer to Purchase
is incorporated herein by reference.
ITEM 3. Purpose of the Tender Offer and Plans or Proposals of
the Issuer or Affiliate.
The information set forth in Section 1 - "Purpose of
the Offer; Certain Effects of the Offer; Plans of the
Company After the Offer" in the Offer to Purchase and
Exhibit (g)(3) hereto is incorporated herein by
reference.
ITEM 4. Interest in Securities of the Issuer.
The information set forth in Section 11 - "Transactions
and Agreements Concerning the Shares" in the Offer to
Purchase is incorporated herein by reference.
ITEM 5. Contracts, Arrangements, Understandings or
Relationships with Respect to the Issuer's Securities.
Not applicable.
ITEM 6. Persons Retained, Employed or to be Compensated.
The information set forth in Section 14 - "Fees and
Expenses" in the Offer to Purchase is incorporated
herein by reference.
Page 2 of 5 Pages
<PAGE>
ITEM 7. Financial Information.
(a) The information set forth in Section 9 - "Certain
Information Concerning the Company" in the Offer to
Purchase and Exhibits (g)(1) and (g)(2) hereto is
incorporated herein by reference.
(b) The information set forth in Section 9 - "Certain
Information Concerning the Company" in the Offer to
Purchase is incorporated herein by reference.
ITEM 8. Additional Information.
(a) The information set forth in Exhibit (g)(3) is
incorporated herein by reference.
(b) There are no applicable regulatory requirements which
must be complied with or approvals which must be
obtained in connection with the Offer other than
compliance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder including, without limitation, Rule 13e-3
and Rule 13e-4 and the requirements of the state
securities or "Blue Sky" laws.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 9. Material to be Filed as Exhibits.
Exhibit No. Description
----------- -----------
(a)(1) Offer to Purchase dated August 21, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees dated August 21, 1996.
(a)(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter to Holders of Shares dated August 21, 1996.
(a)(7) Press Release dated August 21, 1996.
(a)(8) Summary Advertisement dated August 21, 1996.
(a)(9) Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on
Substitute Form W-9.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Annual Report on Form 10-K for the year ended December
31, 1995.
(g)(2) Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
(g)(3) Current Report on Form 8-K, dated August 9, 1996.
Page 3 of 5 Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: August 22, 1996 DELMARVA POWER & LIGHT COMPANY
By: /s/ B.S. Graham
----------------------------------
Name: B.S. Graham
Title: Senior Vice President,
Treasurer and Chief
Financial Officer
Page 4 of 5 Pages
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
(a)(1) Offer to Purchase dated August 21, 1996.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees dated August 21, 1996.
(a)(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter to Holders of Shares dated August 21, 1996.
(a)(7) Press Release dated August 21, 1996.
(a)(8) Summary Advertisement dated August 21, 1996.
(a)(9) Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on
Substitute Form W-9.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Annual Report on Form 10-K for the year ended December
31, 1995.
(g)(2) Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
(g)(3) Current Report on Form 8-K, dated August 9, 1996.
Page 5 of 5 Pages
Exhibit (a)(1)
OFFER TO PURCHASE FOR CASH
BY
DELMARVA POWER & LIGHT COMPANY
ANY AND ALL OF ITS
3.70% Preferred Stock ($100 Par Value) (CUSIP No. 247109 200) at a
Purchase Price of $58.36 Per Share
4% Preferred Stock ($100 Par Value) (CUSIP No. 247109 309) at a
Purchase Price of $60.88 Per Share
4.20% Preferred Stock ($100 Par Value) (CUSIP No. 247109 408) at a
Purchase Price of $66.25 Per Share
4.28% Preferred Stock ($100 Par Value) (CUSIP No. 247109 507) at a
Purchase Price of $67.51 Per Share
4.56% Preferred Stock ($100 Par Value) (CUSIP No. 247109 606) at a
Purchase Price of $71.92 Per Share
5% Preferred Stock ($100 Par Value) (CUSIP No. 247109 705) at a
Purchase Price of $78.86 Per Share
6 3/4% Preferred Stock ($100 Par Value) (CUSIP No. 247109 770) at a
Purchase Price of $104.65 Per Share
7 3/4% Preferred Stock -- $25 Par (CUSIP No. 247109 788) at a
Purchase Price of $28.12 Per Share
Adjustable Rate Preferred Stock, Series A ($100 Par Value)
(CUSIP No. 247109 820) at a Purchase Price of $91.50 Per Share
--------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED
--------------------------------------------------------------------------
Delmarva Power & Light Company, a Delaware and Virginia corporation (the
"Company"), invites (i) the holders of its 3.70% Preferred Stock ($100 par
value) (the "3.70% Preferred") to tender their shares of such stock (the
"3.70% Shares") for a price of $58.36 per 3.70% Share, (ii) the holders of
its 4% Preferred Stock ($100 par value) (the "4% Preferred") to tender
their shares of such stock (the "4% Shares") for a price of $60.88 per 4%
Share, (iii) the holders of its 4.20% Preferred Stock ($100 par value) (the
"4.20% Preferred") to tender their shares of such stock (the "4.20%
Shares") for a price of $66.25 per 4.20% Share, (iv) the holders of its
4.28% Preferred Stock ($100 par value) (the "4.28% Preferred") to tender
their shares of such stock (the "4.28% Shares") for a price of $67.51 per
4.28% Share, (v) the holders of its 4.56% Preferred Stock ($100 par value)
(the "4.56% Preferred") to tender their shares of such stock (the "4.56%
Shares") for a price of $71.92 per 4.56% Share, (vi) the holders of its 5%
Preferred Stock ($100 par value) (the "5% Preferred") to tender their
shares of such stock (the "5% Shares") for a price of $78.86 per 5% Share,
(vii) the holders of its 6 3/4% Preferred Stock ($100 par value) (the "6
3/4% Preferred") to tender their shares of such stock (the "6 3/4% Shares")
for a price of $104.65 per 6 3/4% Share, (viii) the holders of its 7 3/4%
Preferred Stock -- $25 Par (the "7 3/4% Preferred") to tender their shares
of such stock (the "7 3/4% Shares") for a price of $28.12 per 7 3/4% Share
and (ix) the holders of its Adjustable Rate Preferred Stock, Series A ($100
par value) (the "Adjustable Rate Preferred") to tender their shares of such
stock (the "Adjustable Rate Shares") for a price of $91.50 per Adjustable
Rate Share, in each case net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase (the "Offer
to Purchase") and in each applicable Letter of Transmittal (which, together
with the Offer to Purchase, constitutes the "Offer" with respect to the
applicable Series of Preferred (as hereinafter defined)). The 3.70%
Shares, the 4% Shares, the 4.20% Shares, the 4.28% Shares, the 4.56%
Shares, the 5% Shares, the 6 3/4% Shares, the 7 3/4% Shares and the
Adjustable Rate Shares collectively constitute the "Shares." The Company
will purchase any and all Shares validly tendered and not withdrawn. Each
Offer has its own Letter of Transmittal and Notice of Guaranteed Delivery
and only the applicable Letter of Transmittal or Notice of Guaranteed
Delivery may be used to tender shares of that Series of Preferred.
-------------------
THE OFFER FOR ONE SERIES OF PREFERRED STOCK IS INDEPENDENT OF THE OFFER
FOR ANY OTHER SERIES OF PREFERRED STOCK. THE OFFER IS NOT CONDITIONED UPON
ANY MINIMUM NUMBER OF SHARES OF THE APPLICABLE SERIES OF PREFERRED STOCK
BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN OTHER
CONDITIONS. SEE SECTION 7--"CERTAIN CONDITIONS OF THE OFFER."
SUBJECT TO THE RECEIPT OF A PROPERLY COMPLETED AND DULY EXECUTED NOTICE
OF SOLICITED TENDERS AS DESCRIBED HEREIN, THE COMPANY WILL PAY TO A
SOLICITING DEALER (AS DEFINED HEREIN) A SOLICITATION FEE OF $1.32 PER SHARE
($.33 PER SHARE IN THE CASE OF THE 7 3/4% SHARES) FOR ANY SHARES TENDERED,
ACCEPTED FOR PAYMENT AND PAID FOR PURSUANT TO THE OFFER.
-------------------
The Shares, except the 6 3/4% Shares, the 7 3/4% Shares and the
Adjustable Rate Shares, are listed and traded on the Philadelphia Stock
Exchange, Inc. (the "Philadelphia Stock Exchange"). The 6 3/4% Shares, the
7 3/4% Shares and the Adjustable Rate Shares are traded in the over-the-
counter market and are not listed on any national securities exchange or
quoted on the automated quotation system of a registered securities
association. As of August 20, 1996, the last reported sales prices of the
Shares so listed were $50.13 per 3.70% Share, $52.50 per 4% Share, $55.00
per 4.20% Share, $59.25 per 4.28% Share, $63.97 per 4.56% Share and $69.38
per 5% Share. For information concerning the Shares, quarterly sales
prices and bids, see Section 8--"Price Ranges of Shares; Dividends."
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
-------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------------
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS MANAGEMENT MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY
OR ALL SHARES OF ANY SERIES OF PREFERRED STOCK PURSUANT TO
THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS AS
TO WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED
STOCK PURSUANT TO THE OFFER AND, IF SO, HOW MANY
SHARES TO TENDER.
-------------------
The Dealer Managers for the Offer are:
MERRILL LYNCH & CO. MORGAN STANLEY & CO.
INCORPORATED
The date of this Offer to Purchase is August 21, 1996.
<PAGE>
IMPORTANT
Any stockholder desiring to tender any or all of such stockholder's
Shares should either (1) complete and sign the applicable Letter of
Transmittal, in accordance with the instructions in such Letter of
Transmittal, mail it or deliver it by hand, together with any other
required documents, to First Chicago Trust Company of New York, as
Depositary, and deliver the certificates for such Shares to the Depositary
or (2) request such stockholder's broker, dealer, commercial bank, trust
company or nominee to effect the transaction for such stockholder.
Stockholders whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or nominee must contact such broker, dealer,
commercial bank, trust company or nominee if they desire to tender such
Shares. Stockholders who desire to tender Shares and whose certificates for
such Shares are not available immediately, or who cannot comply in a timely
manner with the procedure for book-entry transfer, should tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 4--"Procedure for Tendering Shares."
EACH SERIES OF PREFERRED STOCK HAS ITS OWN LETTER OF TRANSMITTAL AND
NOTICE OF GUARANTEED DELIVERY AND ONLY THE APPLICABLE LETTER OF TRANSMITTAL
OR NOTICE OF GUARANTEED DELIVERY MAY BE USED TO TENDER SHARES OF THAT
SERIES. HOLDERS WHO WISH TO TENDER SHARES FOR MORE THAN ONE SERIES MUST USE
THE APPLICABLE LETTER OF TRANSMITTAL OR NOTICE OF GUARANTEED DELIVERY FOR
EACH SERIES.
Questions or requests for assistance or for additional copies of this
Offer to Purchase, the applicable Letter of Transmittal, the applicable
Notice of Guaranteed Delivery or other tender offer materials may be
directed to D.F. King & Co., Inc., as Information Agent, or the Dealer
Managers at their respective addresses and telephone numbers set forth on
the back cover of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF
THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES OF ANY SERIES OF PREFERRED STOCK PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE APPLICABLE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
RECOMMENDATION, INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1. Purpose of the Offer; Certain Effects of the Offer;
Plans of the Company After the Offer . . . . . . . . . . 2
Section 2. Certain Legal Matters; Regulatory and Foreign Approvals;
No Appraisal Rights . . . . . . . . . . . . . . . . . . 4
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Number of Shares; Purchase Price; Expiration Date;
Receipt of Dividend; Extension of the Offer . . . . . . 5
Section 4. Procedure for Tendering Shares . . . . . . . . . . . . . 6
Section 5. Withdrawal Rights . . . . . . . . . . . . . . . . . . . 7
Section 6. Acceptance for Payment of Shares and Payment of
Purchase Price . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Certain Conditions of the Offer . . . . . . . . . . . . 9
Section 8. Price Ranges of Shares; Dividends . . . . . . . . . . . 10
Section 9. Certain Information Concerning the Company . . . . . . . 14
Section 10. Source and Amount of Funds . . . . . . . . . . . . . . . 17
Section 11. Transactions and Agreements Concerning the Shares . . . 17
Section 12. Extension of Tender Period; Termination; Amendments . . 17
Section 13. Certain U.S. Federal Income Tax Consequences . . . . . . 18
Section 14. Fees and Expenses . . . . . . . . . . . . . . . . . . . 21
Section 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 22
<PAGE>
SUMMARY
This general summary is provided solely for the convenience of holders
of Shares and is qualified in its entirety by reference to the full text
and more specific details contained in this Offer to Purchase and the
applicable Letter of Transmittal and any amendments hereto and thereto.
Each of the capitalized terms used in this Summary and not defined herein
has the meaning set forth elsewhere in this Offer to Purchase.
The Company . . . . . . . . . Delmarva Power & Light Company
The Shares . . . . . . . . . Any and all of the:
3.70% Preferred Stock ($100 par value)
4% Preferred Stock ($100 par value)
4.20% Preferred Stock ($100 par value)
4.28% Preferred Stock ($100 par value)
4.56% Preferred Stock ($100 par value)
5% Preferred Stock ($100 par value)
6 3/4% Preferred Stock ($100 par value)
7 3/4% Preferred Stock -- $25 Par
Adjustable Rate Preferred Stock, Series
A ($100 par value)
Purchase Price . . . . . . . $58.36 per 3.70% Share, $60.88 per 4%
Share, $66.25 per 4.20% Share, $67.51
per 4.28% Share, $71.92 per 4.56% Share,
$78.86 per 5% Share, $104.65 per 6 3/4%
Share, $28.12 per 7 3/4% Share and
$91.50 per Adjustable Rate Share, in
each case net to the seller in cash. See
Section 8--"Price Ranges of Shares;
Dividends."
Independent Offer . . . . . . The Offer for one Series of Preferred is
independent of the Offer for any other
Series of Preferred. The Offer is not
conditioned upon any minimum number of
Shares of the applicable Series of
Preferred being tendered. The Offer,
however, is subject to certain other
conditions. See Section 7--"Certain
Conditions of the Offer."
Expiration Date of the Offer The Offer expires on Friday, September
20, 1996 at 12:00 midnight, New York
City time, unless the Offer is extended
with respect to any Series of Preferred.
How to Tender Shares . . . . See Section 4--"Procedure for Tendering
Shares." For further information, call
the Information Agent or the Dealer
Managers or consult your broker for
assistance.
Withdrawal Rights . . . . . . Tendered Shares of any Series of
Preferred may be withdrawn at any time
until the expiration of the Offer with
respect to such Series of Preferred and,
unless theretofore accepted for payment,
also may be withdrawn after 12:00
midnight, New York City time, on Friday,
October 18, 1996. See Section 5--
"Withdrawal Rights."
Purpose of the Offer . . . . The Company is making the Offer because
it believes that the purchase of Shares
is economically attractive to the
Company. In addition, the Offer gives
stockholders the opportunity to sell
their Shares at a premium over market
price and without the usual transaction
costs associated with a market sale. See
Section 1--"Purpose of the Offer;
Certain Effects of the Offer; Plans of
the Company After the Offer."
Dividends . . . . . . . . . . The Board of Directors of the Company
declared dividends on the Company's
preferred stock at its meeting on July
25, 1996. The regular quarterly
dividend for each Series of Preferred
<PAGE>
will be paid on September 30, 1996, to
holders of record as of the close of
business on September 10, 1996. A holder
of record of Shares on September 10,
1996, who tenders Shares will be
entitled to the regular quarterly
dividend, regardless of when such tender
is made. Holders of Shares purchased
pursuant to the Offer will not be
entitled to any dividends in respect of
any later dividend periods. See Section
8--"Price Ranges of Shares; Dividends."
Brokerage Commissions . . . . Not payable by stockholders.
Solicitation Fee . . . . . . Not payable to Stockholders. The
Company will pay to a Soliciting Dealer
a solicitation fee of $1.32 per Share
for any Shares tendered, accepted for
payment and paid for pursuant to the
Offer, except that the solicitation fee
for the 7 3/4% Shares shall be $.33 per
Share.
Stock Transfer Tax . . . . . None, except as provided in Instruction
6 of the Letters of Transmittal. See
Section 6--"Acceptance for Payment of
Shares and Payment of Purchase Price."
Payment Date . . . . . . . . Promptly after the applicable Expiration
Date of the Offer.
Further Information . . . . . Additional copies of this Offer to
Purchase and the applicable Letter of
Transmittal may be obtained by
contacting D.F. King & Co., Inc., 77
Water Street, 20th Floor, New York, New
York 10005, telephone (800) 431-9646
(toll-free) and (212) 269-5550 (brokers
and banks). Questions about the Offer
should be directed to Merrill Lynch &
Co. at (212) 449-4914 (call collect) or
Morgan Stanley & Co. Incorporated at
(800) 223-2440, ext. 1965.
<PAGE>
INTRODUCTION
To the Holders of 3.70% Preferred Stock,
4% Preferred Stock,
4.20% Preferred Stock,
4.28% Preferred Stock,
4.56% Preferred Stock,
5% Preferred Stock,
6 3/4% Preferred Stock,
7 3/4% Preferred Stock -- $25 Par and
Adjustable Rate Preferred Stock, Series A:
Delmarva Power & Light Company, a Delaware and Virginia corporation (the
"Company"), invites (i) the holders of its 3.70% Preferred Stock ($100 par
value) (the "3.70% Preferred") to tender their shares of such stock (the
"3.70% Shares") for a price of $58.36 per 3.70% Share, (ii) the holders of
its 4% Preferred Stock ($100 par value) (the "4% Preferred") to tender
their shares of such stock (the "4% Shares") for a price of $60.88 per 4%
Share, (iii) the holders of its 4.20% Preferred Stock ($100 par value) (the
"4.20% Preferred") to tender their shares of such stock (the "4.20%
Shares") for a price of $66.25 per 4.20% Share, (iv) the holders of its
4.28% Preferred Stock ($100 par value) (the "4.28% Preferred") to tender
their shares of such stock (the "4.28% Shares") for a price of $67.51 per
4.28% Share, (v) the holders of its 4.56% Preferred Stock ($100 par value)
(the "4.56% Preferred") to tender their shares of such stock (the "4.56%
Shares") for a price of $71.92 per 4.56% Share, (vi) the holders of its 5%
Preferred Stock ($100 par value) (the "5% Preferred") to tender their
shares of such stock (the "5% Shares") for a price of $78.86 per 5% Share,
(vii) the holders of its 6 3/4% Preferred Stock ($100 par value) (the "6
3/4% Preferred") to tender their shares of such stock (the "6 3/4% Shares")
for a price of $104.65 per 6 3/4% Share, (viii) the holders of its 7 3/4%
Preferred Stock -- $25 Par (the "7 3/4% Preferred") to tender their shares
of such stock (the "7 3/4% Shares") for a price of $28.12 per 7 3/4% Share
and (ix) the holders of its Adjustable Rate Preferred Stock, Series A ($100
par value) (the "Adjustable Rate Preferred") to tender their shares of such
stock (the "Adjustable Rate Shares") for a price of $91.50 per Adjustable
Rate Share, in each case net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase (the "Offer
to Purchase") and in the applicable Letter of Transmittal (which, together
with the Offer to Purchase, constitutes the "Offer" with respect to the
applicable Series of Preferred). Each series of the Company's Preferred
Stock subject to the Offer is referred to herein as a "Series of Preferred"
and the shares of all Series of Preferred subject to the Offer are
collectively referred to as the "Shares." The Company will purchase all
Shares validly tendered and not withdrawn, upon the terms and subject to
the conditions of the Offer.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS MANAGEMENT MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES
OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE
THEIR OWN DECISIONS AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF
PREFERRED PURSUANT TO THE OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
The Board of Directors of the Company (the "Board") declared dividends
on the Company's preferred stock at its meeting on July 25, 1996. A
regular quarterly dividend on each Series of Preferred will be paid on
September 30, 1996, to holders of record as of the close of business on
September 10, 1996. A holder of record of Shares on September 10, 1996, who
tenders Shares will be entitled to the regular quarterly dividend,
regardless of when such tender is made. Holders of Shares purchased
pursuant to the Offer will not be entitled to any dividends in respect of
any later dividend periods.
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR
ANY OTHER SERIES OF PREFERRED. THE OFFER IS NOT CONDITIONED UPON ANY
MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO
CERTAIN OTHER CONDITIONS. SEE SECTION 7--"CERTAIN CONDITIONS OF THE OFFER."
Tendering stockholders will not be obligated to pay brokerage
commissions, solicitation fees or, subject to the Instructions to the
applicable Letter of Transmittal, stock transfer taxes on the purchase of
<PAGE>
Shares by the Company. The Company will pay all charges and expenses of the
Depositary, Information Agent and the Dealer Managers incurred in
connection with the Offer.
As of August 20, 1996, there were issued and outstanding 50,000 Shares
of each of the 3.70% Preferred, the 4.20% Preferred, the 4.28% Preferred
and the 4.56% Preferred; 40,000 Shares of the 4% Preferred; 80,000 Shares
of the 5% Preferred; 200,000 Shares of the 6 3/4% Preferred; 1,600,000
Shares of the 7 3/4% Preferred and 160,850 Shares of the Adjustable Rate
Preferred. The Company is offering to purchase any and all Shares of each
Series of Preferred.
Each Series of Preferred, other than the 6 3/4% Preferred, the 7 3/4%
Preferred and the Adjustable Rate Preferred, is listed and traded on the
Philadelphia Stock Exchange under the following respective symbols: 3.70%
Preferred under "DEW 3.7%;" 4% Preferred under "DEW 4.0%;" 4.20% Preferred
under "DEW 4.2%;" 4.28% Preferred under "DEW 4.28%;" 4.56% Preferred under
"DEW 4.56%;" and 5% Preferred under "DEW 5.0%." As of August 20, 1996, the
last reported sales prices of the Shares so listed were $50.13 per 3.70%
Share, $52.50 per 4% Share, $55.00 per 4.20% Share, $59.25 per 4.28% Share,
$63.97 per 4.56% Share and $69.38 per 5% Share. The 6 3/4% Shares, the 7
3/4% Shares and the Adjustable Rate Shares are traded in the
over-the-counter market and are not listed on any national securities
exchange or quoted on the automated quotation system of a registered
securities association. Stockholders are urged to obtain current market
quotations for the Shares. The information concerning recent quarterly
trading history of the Shares of each Series of Preferred is set forth in
Section 8--"Price Ranges of Shares; Dividends."
SPECIAL FACTORS
SECTION 1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF
THE COMPANY AFTER THE OFFER.
The Company is making the Offer because it believes that, given the
current market prices of the Shares and the opportunity for the Company to
replace the Shares with other securities that in the aggregate have a lower
after-tax cost, the purchase of the Shares pursuant to the Offer is
economically attractive to the Company. See Section 9--"Certain Information
Concerning the Company." With the exception of one non-employee director
not present at the meeting and one non-employee director who abstained from
voting because of the involvement of the law firm of which he is a member
in the offering by Delmarva Power Financing I, a special purpose business
trust controlled by the Company, of Trust Securities (as defined herein),
the proceeds of which will be used primarily to fund the Offer, each Board
member, including all other non-employee directors of the Company, voted to
authorize the Offer.
The Company believes the Offer is fair to unaffiliated holders of
Shares. In making this determination, the Company considered that (a) the
Offer gives holders of Shares the opportunity to sell their Shares at a
premium over market price and (b) the Offer provides stockholders who are
considering a sale of all or a portion of the Shares the opportunity to
sell those Shares for cash without the usual transaction costs associated
with open-market sales. See Section 8--"Price Ranges of Shares; Dividends."
The Company did not find it practicable to, and did not, quantify or
otherwise assign relative weights to these factors.
Neither the Company nor the Board received any report, opinion or
appraisal from an outside party which is materially related to the Offer,
including, but not limited to, any report, opinion or appraisal relating to
the consideration or the fairness of the consideration to be offered to the
holders of the Shares or the fairness of such Offer to the Company or the
unaffiliated holders of Shares. Neither the Board nor any director has
retained an unaffiliated representative to act solely on behalf of
unaffiliated holders of Shares for the purposes of negotiating the terms of
the Offer or preparing a report concerning the fairness of the Offer.
Except as set forth in Section 9--"Certain Information Concerning the
Company," following the consummation of the Offer, the business and
operations of the Company will be continued by the Company substantially as
they are currently being conducted. On August 12, 1996, the Company and
Atlantic Energy, Inc. announced a proposed merger transaction. The holders
of Shares will not have a right to approve or disapprove of the proposed
merger transaction. See Section 9--"Certain Information Concerning the
Company." The Company has no other plans or proposals which relate to or
would result in: (a) the acquisition by any Person of additional securities
of the Company or the disposition of securities of the Company, other than
in the ordinary course of business; (b) an extraordinary corporate
<PAGE>
transaction, such as a merger, reorganization or liquidation involving the
Company; (c) a sale or transfer of a material amount of assets of the
Company; (d) any change in the present Board or management of the Company;
(e) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; (f) any other material
change in the Company's corporate structure or business; (g) a change in
the Company's Restated Certificate and Articles of Incorporation, as
amended, or By-laws, as amended; (h) except as otherwise described in this
Offer to Purchase, a class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or
(i) except as otherwise described in this Offer to Purchase, the suspension
of the Company's obligation to file reports pursuant to Section 15(d) of
the Exchange Act.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to redeem Shares then subject to redemption at the
applicable redemption prices, or to purchase any outstanding Shares through
privately-negotiated transactions, open-market purchases, another tender
offer, or otherwise, on such terms and at such prices as the Company may
determine from time to time. The terms of subsequent purchases or offers
could differ from those of the Offer, and may be at a higher price than the
related price per Share offered hereby, except that the Company will not
make any such purchases of Shares until the expiration of ten business days
after the termination of the Offer. Any possible future purchases of Shares
by the Company will depend on many factors, including the market prices of
the Shares, the Company's business and financial position, alternative
investment opportunities available to the Company, the results of the Offer
and general economic and market conditions.
As of July 26, 1996, the ratings of the Company's preferred stock,
including each Series of Preferred, by Standard & Poor's Ratings Group
("S&P") and Moody's Investors Service, Inc. ("Moody's") were "A-" and "a3",
respectively. Following the announcement of a proposed merger transaction
on August 12, 1996 by the Company and Atlantic Energy, Inc., such
securities have been placed on review for a possible downgrade by S&P and
Moody's. See Section 9--"Certain Information Concerning the Company."
The purchase of Shares of a Series of Preferred pursuant to the Offer
will reduce the number of holders of Shares of that Series of Preferred and
the number of such Shares that might otherwise trade publicly and,
depending upon the number of Shares so purchased, such reduction could
adversely affect the liquidity and market value of the remaining Shares of
that Series of Preferred held by the public. Depending upon the number of
Shares of a Series of Preferred purchased pursuant to the Offer, the Shares
of that Series of Preferred may no longer meet the requirements of the
Philadelphia Stock Exchange for continued listing, other than the 6 3/4%
Preferred, the 7 3/4% Preferred and the Adjustable Rate Preferred, which
are not listed. According to the Philadelphia Stock Exchange's published
guidelines, the Philadelphia Stock Exchange would consider delisting a
Series of Preferred if, among other things, (i) the number of publicly-held
Shares for such Series of Preferred should fall below 200,000 or the
aggregate market value of such Series of Preferred should fall below
$1,000,000 or (ii) the number of public stockholders should fall below 400.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, any of the six Series of Preferred currently listed on the
Philadelphia Stock Exchange no longer meets the requirements of the
Philadelphia Stock Exchange for continued listing and the listing of such
Series of Preferred is discontinued, the market for such Series of
Preferred would be affected adversely.
In the event of the delisting of any of the six Series of Preferred
currently listed on the Philadelphia Stock Exchange, it is possible that
such Series of Preferred would continue to trade on another securities
exchange or in the over-the-counter market and that price quotations would
be reported by such exchange, by the National Association of Securities
Dealers, Inc. ("NASD") through the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or by other sources. The
extent of the public market for such Series of Preferred and the
availability of such quotations, however, would depend upon such factors as
the number of stockholders remaining at such time, the interest in
maintaining a market in such Series of Preferred on the part of securities
firms, the possible termination of registration under the Exchange Act as
described below and other factors.
The six Series of Preferred currently listed on the Philadelphia Stock
Exchange are presently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System, which has the effect,
among other things, of allowing brokers to extend credit on the collateral
of such securities. If a Series of Preferred remains listed on the
Philadelphia Stock Exchange, the Shares of such Series of Preferred will
continue to be "margin securities." If a Series of Preferred currently
listed on the Philadelphia Stock Exchange were delisted, depending upon
factors similar to those described above, such Series of Preferred might no
<PAGE>
longer constitute "margin securities" for purposes of the margin
regulations of the Board of Governors of the Federal Reserve System, in
which case, Shares of such Series of Preferred could no longer be used as
collateral for loans made by brokers.
There currently are issued and outstanding 200,000 Shares of the 6 3/4%
Preferred, 1,600,000 Shares of the 7 3/4% Preferred and 160,850 Shares of
the Adjustable Rate Preferred that are traded only in the over-the-counter
market.
Each Series of Preferred is currently registered under the Exchange Act.
Registration of any such series under the Exchange Act may be terminated
upon application of the Company to the Securities and Exchange Commission
(the "Commission") pursuant to Section 12(g)(4) of the Exchange Act if such
Series of Preferred is neither held by 300 or more holders of record nor
listed on a national securities exchange. Termination of registration of
any Series of Preferred under the Exchange Act would reduce substantially
the information required to be furnished by the Company to holders of
Shares of such Series of Preferred (although the Company would, among other
things, remain subject to the reporting obligations under the Exchange Act
as a result of other of its outstanding securities) and would make certain
provisions of the Exchange Act, such as the requirement of Rule 13e-3
thereunder with respect to "going private" transactions, no longer
applicable in respect of such Series of Preferred. If registration of any
Series of Preferred under the Exchange Act were terminated, Shares of such
Series of Preferred would no longer be "margin securities" or be eligible
for NASDAQ reporting. There currently are 86 holders of record of the 3.70%
Preferred, 194 holders of record of the 4% Preferred, 104 holders of record
of the 4.20% Preferred, 57 holders of record of the 4.28% Preferred, 84
holders of record of the 4.56% Preferred, 143 holders of record of the 5%
Preferred, 1 holder of record of the 6 3/4% Preferred, 345 holders of
record of the 7 3/4% Preferred and 1 holder of record of the Adjustable
Rate Preferred.
All Shares purchased by the Company pursuant to the Offer will be
retired, canceled and returned thereafter to the status of authorized but
unissued shares of the Company's Preferred Stock. All Shares, except the 6
3/4% Shares and the 7 3/4% Shares, remaining outstanding after the Offer
will continue to be redeemable at the option of the Company at the
redemption price plus accumulated and unpaid dividends to the date of
redemption, which price is greater than the applicable price per Share
offered hereby. The 6 3/4% Shares and the 7 3/4% Shares will be redeemable
at the option of the Company on and after November 1, 2003 and September
30, 2002, respectively, and the Adjustable Rate Shares currently are
redeemable at the option of the Company at 100% of the par value plus
accumulated and unpaid dividends to the date of redemption. Upon
liquidation or dissolution of the Company, holders of each Series of
Preferred are entitled to receive a liquidation preference of $100 per
Share ($25 per Share in the case of the 7 3/4% Shares), plus all
accumulated and unpaid dividends thereon to the date of payment, prior to
the payment of any amounts to holders of the Company's Common Stock.
THE COMPANY, ITS BOARD AND ITS MANAGEMENT MAKE NO RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES OF ANY SERIES OF
PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS
AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE
OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
SECTION 2. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO
APPRAISAL RIGHTS.
The Company is not aware of any license or regulatory permit that
appears to be material to its business that might be adversely affected by
its acquisition of Shares as contemplated in the Offer or of any approval
or other action by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, that would be required
for the Company's acquisition or ownership of Shares pursuant to the Offer,
except as described under Section 9--"Certain Information Concerning the
Company." Should any other approval or other action be required, the
Company currently contemplates that it will seek such approval or other
action. The Company cannot predict whether it may determine that it is
required to delay the acceptance for payment of, or payment for, Shares
tendered pursuant to the Offer pending the outcome of any such matter.
There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial
conditions or that the failure to obtain any such approval or other action
might not result in adverse consequences to the Company's business.
The Company intends to make all required filings under the Exchange Act.
<PAGE>
The Company's obligation under the Offer to accept for payment, or make
payment for, Shares is subject to certain conditions. See Section 7--
"Certain Conditions of the Offer."
No approval of the holders of any Shares or the holders of any of the
Company's other securities is required in connection with the Offer.
No appraisal rights are available to holders of Shares in connection
with the Offer.
THE OFFER
SECTION 3. NUMBER OF SHARES; PURCHASE PRICE; EXPIRATION DATE; RECEIPT OF
DIVIDEND; EXTENSION OF THE OFFER.
NUMBER OF SHARES; PURCHASE PRICE; EXPIRATION DATE. Upon the terms and
subject to the conditions described in this Offer to Purchase and in the
applicable Letter of Transmittal, the Company will purchase any and all
Shares of a Series of Preferred validly tendered on or prior to the
Expiration Date with respect to that Series of Preferred (and not
withdrawn) at a price of $58.36 per 3.70% Share, $60.88 per 4% Share,
$66.25 per 4.20% Share, $67.51 per 4.28% Share, $71.92 per 4.56% Share,
$78.86 per 5% Share, $104.65 per 6 3/4% Share, $28.12 per 7 3/4% Share and
$91.50 per Adjustable Rate Share. The later of 12:00 midnight, New York
City time, on September 20, 1996, or the latest time and date to which the
Offer with respect to a Series of Preferred is extended, is referred to
herein as the "Expiration Date" with respect to that Series of Preferred.
The Offer for one Series of Preferred is independent of the Offer for any
other Series of Preferred. The Offer is not conditioned on any minimum
number of Shares of the applicable Series of Preferred being tendered. The
Offer, however, is subject to certain other conditions. See Section 7--
"Certain Conditions of the Offer."
RECEIPT OF DIVIDEND. The Board declared dividends on the Company's
preferred stock at its meeting on July 25, 1996. A regular quarterly
dividend for each Series of Preferred will be paid on September 30, 1996,
to holders of record as of the close of business on September 10, 1996. A
holder of record of Shares on September 10, 1996, who tenders Shares will
be entitled to such regular quarterly dividend, regardless of when such
tender is made. Holders of Shares purchased pursuant to the Offer will not
be entitled to any dividends in respect of any later dividend periods.
EXTENSION OF THE OFFER. The Company expressly reserves the right, in
its sole discretion, at any time or from time to time prior to the
Expiration Date, to extend the period of time during which the Offer is
open with respect to a Series of Preferred by giving oral or written notice
of such extension to the Depositary and making a public announcement
thereof. If the Company extends the Offer with respect to one Series of
Preferred, the Company is under no obligation to extend the Offer with
respect to any other Series of Preferred. See Section 12--"Extension of
Tender Period; Termination; Amendments." There can be no assurance,
however, that the Company will exercise its right to extend any Offer or,
if one Offer is extended, that any other Offer also will be extended.
If (a) the Company (i) increases or decreases the price to be paid for
the Shares of a Series of Preferred hereunder or (ii) increases or
decreases the Soliciting Dealers' fees, and (b) the applicable Offer is
scheduled to expire at any time earlier than the tenth business day from
and including the date that notice of such increase or decrease is first
published, sent or given in the manner specified in Section 12--"Extension
of the Tender Period; Termination; Amendments," the Offer for such Shares
of that Series of Preferred will be extended until the expiration of such
ten business day period. For purposes of the Offer, "business day" means
any day other than a Saturday, Sunday or Federal holiday and consists of
the time period from 12:01 a.m. through 12:00 midnight, New York City time.
All tendered Shares not purchased pursuant to the Offer will be returned
to the tendering stockholders at the Company's expense promptly following
the applicable Expiration Date.
<PAGE>
SECTION 4. PROCEDURE FOR TENDERING SHARES.
TENDER OF SHARES. For Shares to be tendered validly pursuant to the
Offer, either (i) a properly completed and duly executed Letter of
Transmittal and the certificates for such Shares, together with any
required signature guarantees and any other documents required by the
Letter of Transmittal or a confirmation of book-entry transfer ("Book-Entry
Confirmation"), including an Agent's Message (as defined below), must be
received by the Depositary at any one of its addresses set forth on the
back cover of this Offer to Purchase or (ii) the tendering stockholder must
comply with the guaranteed delivery procedure set forth below on or before
the applicable Expiration Date. The term "Agent's Message" means a message
transmitted by a Book-Entry Transfer Facility to and received by the
Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express
acknowledgment from the participant in such Book-Entry Transfer Facility
tendering the Shares which are the subject of such Book-Entry Confirmation,
that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Company may enforce such agreement
against such participant.
A tender of Shares made pursuant to any method of delivery set forth
herein or in the applicable Letter of Transmittal will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions of the Offer.
No alternative, conditional or contingent tenders of Shares will be
accepted.
It is a violation of Rule 14e-4 promulgated under the Exchange Act for
persons to tender Shares for their own account unless the persons so
tendering (a) have a net long position equal to or greater than the amount
of Shares tendered or other securities immediately convertible into, or
exercisable or exchangeable for, the amount of Shares tendered, and will
acquire such Shares for tender by conversion, exercise or exchange of such
other securities and (b) will cause such Shares to be delivered in
accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. The tender of Shares pursuant to any one of the procedures
described herein will constitute the tendering stockholder's representation
and warranty that (a) such stockholder has a net long position in the
Shares being tendered within the meaning of Rule 14e-4, and (b) the tender
of such Shares complies with Rule 14e-4. The Company's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms
and subject to the conditions of the Offer.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with
respect to the Shares at The Depository Trust Company and The Philadelphia
Depository Trust Company (together referred to as the "Book-Entry Transfer
Facilities") for purposes of the Offer within two business days after the
date of this Offer to Purchase. Any financial institution that is a
participant in the system of either Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with the procedures
of such Book-Entry Transfer Facility. Prior to the applicable Expiration
Date, a Book-Entry Confirmation, including an Agent's Message, in
connection with any book-entry transfer must be transmitted to, and
received by, the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase or the guaranteed delivery procedure set
forth below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Except as otherwise
provided below, all signatures on a Letter of Transmittal must be
guaranteed by a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program or the Stock Exchange Medallion
Program (each of the foregoing being referred to as an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed
if (a) such Letter of Transmittal is signed by the registered holder of the
Shares tendered therewith and such holder has not completed the box
entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the applicable Letter of Transmittal or (b) such
Shares are tendered for the account of an Eligible Institution. If Shares
are registered in the name of a person other than the signatory on the
applicable Letter of Transmittal, or if unpurchased Shares are to be issued
to a person other than the registered holder(s), the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
<PAGE>
exactly as the name or names of the registered holder(s) appear on the
Shares with the signature(s) on the Shares or stock powers guaranteed as
aforesaid. See Instructions 1 and 5 to the applicable Letter of
Transmittal.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY.
GUARANTEED DELIVERY PROCEDURE. If a stockholder desires to tender
Shares pursuant to the Offer and cannot deliver certificates for such
Shares and all other required documents to the Depositary on or prior to
the applicable Expiration Date, or the procedure for book-entry transfer
cannot be complied with in a timely manner, such Shares nevertheless may be
tendered if all of the following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery in the form provided by the Company is received by the
Depositary as provided below on or prior to the applicable Expiration
Date; and
(c) either (i) the certificates for such Shares, together with a
properly completed and duly executed Letter of Transmittal for the
Series of Preferred being tendered, and any other documents required by
such Letter of Transmittal or (ii) a Book-Entry Confirmation of transfer
of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities are received by the Depositary no later than 5:00
p.m., New York City time, on the third New York Stock Exchange trading
day after the Expiration Date.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile transmittal or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in
such Notice.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the form of
documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination shall be final and
binding. The Company reserves the absolute right to reject any or all
tenders of Shares that it determines are not in proper form or the
acceptance for payment of or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute
right to waive any defect or irregularity in any tender of Shares. No
tender of Shares will be deemed to be properly made until all defects or
irregularities have been cured or waived. None of the Company, the Dealer
Managers, the Depositary, the Information Agent or any other person will be
under any duty to give notice of any defect or irregularity in tenders, nor
shall any of them incur any liability for failure to give any such notice.
SECTION 5. WITHDRAWAL RIGHTS.
Tenders of Shares of a Series of Preferred made pursuant to the Offer
may be withdrawn at any time on or prior to the Expiration Date with
respect to such Series of Preferred. Thereafter, such tenders are
irrevocable, except that they may be withdrawn after 12:00 midnight, New
York City time, on Friday, October 18, 1996, unless theretofore accepted
for payment as provided in this Offer to Purchase.
To be effective, a written or facsimile transmission notice of
withdrawal must be received in a timely manner by the Depositary at one of
its addresses or facsimile numbers set forth on the back cover of this
Offer to Purchase and must specify the name of the person who tendered the
Shares of the applicable Series of Preferred to be withdrawn and the number
of Shares to be withdrawn. If the Shares of the applicable Series of
Preferred to be withdrawn have been delivered to the Depositary, a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
(except in the case of Shares tendered by an Eligible Institution) must be
submitted prior to the release of such Shares. In addition, such notice
must specify, in the case of Shares tendered by delivery of certificates,
the name of the registered holder (if different from that of the tendering
stockholder) and the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn or, in the case of Shares tendered by
book-entry transfer, the name and number of the account at one of the
<PAGE>
Book-Entry Transfer Facilities to be credited with the withdrawn Shares and
the name of the registered holder (if different from the name on such
account). Withdrawals may not be rescinded, and Shares withdrawn thereafter
will be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by following one of the procedures
described in Section 4--"Procedure for Tendering Shares" at any time on or
prior to the applicable Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Company in its sole
discretion, and its determination shall be final and binding. None of the
Company, the Dealer Managers, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for failure
to give any such notification.
SECTION 6. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE
PRICE.
Upon the terms and subject to the conditions of the Offer and promptly
after the Expiration Date with respect to a Series of Preferred, the
Company will accept for payment and pay for Shares of that Series of
Preferred validly tendered. See Section 3--"Number of Shares; Purchase
Price; Expiration Date; Receipt of Dividend; Extension of the Offer" and
Section 7--"Certain Conditions of the Offer." Thereafter, payment for all
Shares of that Series of Preferred validly tendered on or prior to the
applicable Expiration Date and accepted for payment pursuant to the Offer
will be made by the Depositary by check promptly after the Expiration Date.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i)
certificates for Shares, a properly completed and duly executed Letter of
Transmittal for the Series of Preferred so tendered and any other required
documents or (ii) a Book-Entry Confirmation of transfer of such Shares into
the Depositary's account at one of the Book-Entry Transfer Facilities.
For purposes of the Offer, the Company will be deemed to have accepted
for payment (and thereby purchased) Shares that are validly tendered and
not withdrawn if and when it gives oral or written notice to the Depositary
of its acceptance for payment of such Shares. The Company will pay for
Shares that it has purchased pursuant to the Offer by depositing the
purchase price therefor with the Depositary. The Depositary will act as
agent for tendering stockholders for the purpose of receiving payment from
the Company and transmitting payment to tendering stockholders. Under no
circumstances will interest be paid on amounts to be paid to tendering
stockholders, regardless of any delay in making such payment.
Certificates for all Shares not purchased will be returned (or, in the
case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained with a Book-Entry Transfer Facility)
promptly, without expense to the tendering stockholder.
Payment for Shares may be delayed in the event of difficulty in
determining the number of Shares properly tendered. In addition, if certain
events occur, the Company may not be obligated to purchase Shares pursuant
to the Offer. See Section 7--"Certain Conditions of the Offer."
The Company will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares to the Company or its order
pursuant to the Offer. However, if payment of the purchase price is to be
made to, or Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder, or if tendered
Shares are registered in the name of any person other than the person
signing the applicable Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder, such other person
or otherwise) payable on account of the transfer to such person will be
deducted from the purchase price, unless satisfactory evidence of the
payment of such taxes, or exemption therefrom, is submitted. See
Instruction 6 to the applicable Letter of Transmittal.
BACKUP WITHHOLDING. To prevent backup U.S. federal income tax
withholding with respect to the purchase price of Shares purchased pursuant
to the Offer, a holder of Shares (except as set forth herein) must provide
the Depositary with the holder's correct taxpayer identification number and
certify whether the holder is subject to backup withholding of U.S. federal
income tax by completing the Substitute Form W-9 included in the applicable
Letter of Transmittal. Certain holders of Shares (including, among others,
all corporations and certain foreign stockholders) are not subject to these
backup withholding and reporting requirements (although foreign
stockholders are subject to other withholding requirements). See Section
13--"Certain U.S. Federal Income Tax Consequences." In order for a foreign
stockholder to qualify as an exempt recipient, the holder must submit a
<PAGE>
Form W-8, Certificate of Foreign Status, signed under penalties of perjury,
attesting to that stockholder's exempt status. Unless an exemption applies
under the applicable law and regulations concerning "backup withholding" of
U.S. federal income tax, the Depositary will be required to withhold, and
will withhold, 31% of the gross proceeds otherwise payable to a holder of
Shares or other payee unless the holder of such Shares or other payee
certifies that such person is not otherwise subject to backup withholding,
provides such person's tax identification number (social security number or
employer identification number) and certifies that such number is correct.
Each tendering holder of Shares should complete and sign the main signature
form and, other than foreign stockholders, the Substitute Form W-9 included
as part of the applicable Letter of Transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless
an applicable exemption exists and is proved in a manner satisfactory to
the Company and the Depositary. Foreign stockholders generally should
complete and sign a Form W-8, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN
THE SUBSTITUTE FORM W-9 INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL
(OR, IN THE CASE OF A FOREIGN STOCKHOLDER, FORM W-8 OBTAINABLE FROM THE
DEPOSITARY) MAY BE SUBJECT TO REQUIRED U.S. FEDERAL INCOME TAX WITHHOLDING
OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE
PURSUANT TO THE OFFER.
SECTION 7. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, or any extension of
the Offer, the Company will not be required to accept for payment and pay
for Shares of a Series of Preferred in respect of any validly tendered
Shares and may terminate the Offer with respect to such Series of Preferred
(by oral or written notice to the Depositary and timely public
announcement) or may modify or otherwise amend any such Offer with respect
to such Shares if any of the following conditions are not waived or
satisfied on or prior to the applicable Expiration Date:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person,
domestic or foreign, or before any court, authority, agency or tribunal
that (i) challenges the acquisition of Shares of that Series of
Preferred pursuant to the Offer or otherwise in any manner, directly or
indirectly, relates to or affects the Offer or (ii) in the reasonable
judgment of the Company, would or might affect materially and adversely
the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries taken as a whole, or
otherwise impair materially in any way the contemplated future conduct
of the business of the Company or any of its subsidiaries or impair
materially the Offer's contemplated benefits to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company
or any of its subsidiaries, by any legislative body, court, authority,
agency or tribunal which, in the Company's reasonable judgment, would or
might directly or indirectly (i) make the acceptance for payment of, or
payment for, some or all of the Shares of that Series of Preferred
illegal or otherwise restrict or prohibit consummation of the Offer,
(ii) delay or restrict the ability of the Company, or render the Company
unable, to accept for payment or pay for some or all of the Shares of
that Series of Preferred, (iii) impair materially the contemplated
benefits of the Offer to the Company or (iv) affect materially the
business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries taken as a whole, or
otherwise impair materially in any way the contemplated future conduct
of the business of the Company or any of its subsidiaries;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market, (ii) any significant decline
in the market price of the Shares of that Series of Preferred, (iii) any
change in the general political market, economic or financial condition
in the United States or abroad that, in the reasonable judgment of the
Company, would or might have a material adverse effect on the Company's
business, operations, prospects or ability to obtain financing generally
or the trading in the Shares of that Series of Preferred or other equity
securities of the Company, (iv) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
or any limitation on, or any event which, in the Company's reasonable
<PAGE>
judgment, might affect the extension of credit by lending institutions
in the United States, (v) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly
involving the United States; (vi) in the case of any of the foregoing
existing at the time of the commencement of the Offer, in the Company's
reasonable judgment, a material acceleration or worsening thereof; or
(vii) there shall have been any decrease in the ratings accorded any of
the Company's securities by S&P or Moody's;
(d) a tender or exchange offer with respect to some or all of the
Shares of that Series of Preferred or other equity securities of the
Company, or a merger, acquisition or other business combination for the
Company, shall have been proposed, announced or made by another person;
(e) there shall have occurred any event or events that have resulted,
or may result in the reasonable judgment of the Company, in an actual or
threatened change in the business, condition (financial or other),
income, operations, stock ownership or prospects of the Company and its
subsidiaries;
(f) there shall have occurred any decline in the S&P's Composite 500
Stock Index by an amount in excess of 15% measured from the close of
business on August 20, 1996; or
(g) the Company elects not to proceed, or shall not have received
approval from the Delaware Public Service Commission and the Virginia
Corporation Commission necessary to proceed, with the proposed offering
of Cumulative Trust Preferred Capital Securities ("Trust Securities") by
Delmarva Power Financing I, a special purpose business trust controlled
by the Company, or the offering of the Trust Securities, if commenced,
is terminated on or prior to the applicable Expiration Date;
and, in the reasonable judgment of the Company, such event or events make
it undesirable or inadvisable to proceed with the Offer with respect to
such Series of Preferred or with such payment or acceptance for payment.
The consummation of the Offer for any Series of Preferred is not
conditioned on the consummation of the Offer for any other Series of
Preferred.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances (including any
action or inaction by the Company) giving rise to any such condition with
respect to any or all Series of Preferred, and any such condition may be
waived by the Company with respect to any or all Series of Preferred at any
time and from time to time in its sole discretion. The Company's decision
to terminate or otherwise amend the Offer, following the occurrence of any
of the foregoing, with respect to one Series of Preferred will not create
an obligation on behalf of the Company similarly to terminate or otherwise
amend the Offer with respect to any other Series of Preferred. The failure
by the Company at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Company concerning the events described
above will be final and binding on all parties.
SECTION 8. PRICE RANGES OF SHARES; DIVIDENDS.
Stockholders should be aware that the Shares of each Series of Preferred
only trade sporadically; therefore, the Company believes that the last
reported sale prices may not reflect accurately the current market value of
the Shares. The high and low sale prices of the Shares in the following
tables are taken from the Bloomberg Exchange close of business quotations.
<PAGE>
3.70% SHARES
The 3.70% Shares are listed and traded on the Philadelphia Stock
Exchange. The following table sets forth the high and low sales prices of
the 3.70% Shares on the Philadelphia Stock Exchange and the cash dividends
per 3.70% Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . . * * $.925
2nd Quarter . . . . . . . $64.50 $45.38 $.925
3rd Quarter . . . . . . . $47.65 $46.55 $.925
4th Quarter . . . . . . . $45.38 $42.25 $.925
1995: 1st Quarter . . . . . . . $47.35 $45.65 $.925
2nd Quarter . . . . . . . $51.75 $51.75 $.925
3rd Quarter . . . . . . . $54.13 $49.63 $.925
4th Quarter . . . . . . . $54.17 $50.38 $.925
1996: 1st Quarter . . . . . . . $56.20 $55.63 $.925
2nd Quarter . . . . . . . $50.50 $49.13 $.925
3rd Quarter (through July
18, 1996) . . . . . . * * $.925
----------
*No trades.
The last reported sale of 3.70% Shares on the Philadelphia Stock
Exchange prior to the date hereof occurred on May 8, 1996 at a price of
$50.13 per 3.70% Share.
4% SHARES
The 4% Shares are listed and traded on the Philadelphia Stock Exchange.
The following table sets forth the high and low sales prices of the 4%
Shares on the Philadelphia Stock Exchange and the cash dividends per 4%
Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . * * $1.00
2nd Quarter . . . . . . $48.75 $48.50 $1.00
3rd Quarter . . . . . . $49.25 $48.38 $1.00
4th Quarter . . . . . . $49.63 $47.00 $1.00
1995: 1st Quarter . . . . . . $47.63 $44.25 $1.00
2nd Quarter . . . . . . $53.50 $47.00 $1.00
3rd Quarter . . . . . . $53.00 $50.00 $1.00
4th Quarter . . . . . . $55.10 $51.63 $1.00
1996: 1st Quarter . . . . . . $57.15 $53.00 $1.00
2nd Quarter . . . . . . $53.70 $52.00 $1.00
3rd Quarter (through
July 18, 1996) . . $54.25 $52.50 $1.00
----------
*No trades.
The last reported sale of 4% Shares on the Philadelphia Stock Exchange
prior to the date hereof occurred on July 18, 1996 at a price of $52.50 per
4% Share.
<PAGE>
4.20% SHARES
The 4.20% Shares are listed and traded on the Philadelphia Stock
Exchange. The following table sets forth the high and low sales prices of
the 4.20% Shares on the Philadelphia Stock Exchange and the cash dividends
per 4.20% Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . . . * * $1.05
2nd Quarter . . . . . . . . $51.50 $51.50 $1.05
3rd Quarter . . . . . . . . $51.15 $51.15 $1.05
4th Quarter . . . . . . . . $49.62 $47.00 $1.05
1995: 1st Quarter . . . . . . . . $52.35 $48.50 $1.05
2nd Quarter . . . . . . . . $59.25 $54.50 $1.05
3rd Quarter . . . . . . . . $58.90 $55.13 $1.05
4th Quarter . . . . . . . . $61.95 $56.50 $1.05
1996: 1st Quarter . . . . . . . . $59.00 $59.00 $1.05
2nd Quarter . . . . . . . . $59.00 $55.00 $1.05
3rd Quarter (through July
18, 1996) . . . . . . . $55.00 $55.00 $1.05
----------
*No trades.
The last reported sale of 4.20% Shares on the Philadelphia Stock
Exchange prior to the date hereof occurred on July 8, 1996 at a price of
$55.00 per 4.20% Share.
4.28% SHARES
The 4.28% Shares are listed and traded on the Philadelphia Stock
Exchange. The following table sets forth the high and low sales prices of
the 4.28% Shares on the Philadelphia Stock Exchange and the cash dividends
per 4.28% Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . . . * * $1.07
2nd Quarter . . . . . . . . $55.25 $54.00 $1.07
3rd Quarter . . . . . . . . * * $1.07
4th Quarter . . . . . . . . $53.00 $50.60 $1.07
1995: 1st Quarter . . . . . . . . $45.55 $45.55 $1.07
2nd Quarter . . . . . . . . $59.00 $50.75 $1.07
3rd Quarter . . . . . . . . $59.55 $55.88 $1.07
4th Quarter . . . . . . . . $62.65 $58.25 $1.07
1996: 1st Quarter . . . . . . . . $59.25 $56.00 $1.07
2nd Quarter . . . . . . . . * * $1.07
3rd Quarter (through July
18, 1996) . . . . . . . * * $1.07
----------
*No trades.
The last reported sale of 4.28% Shares on the Philadelphia Stock
Exchange prior to the date hereof occurred on March 22, 1996 at a price of
$59.25 per 4.28% Share.
<PAGE>
4.56% SHARES
The 4.56% Shares are listed and traded on the Philadelphia Stock
Exchange. The following table sets forth the high and low sales prices of
the 4.56% Shares on the Philadelphia Stock Exchange and the cash dividends
per 4.56% Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . . . . . * * $1.14
2nd Quarter . . . . . . . . . . $59.13 $56.63 $1.14
3rd Quarter . . . . . . . . . . $55.50 $54.38 $1.14
4th Quarter . . . . . . . . . . $55.50 $51.50 $1.14
1995: 1st Quarter . . . . . . . . . . $58.45 $55.60 $1.14
2nd Quarter . . . . . . . . . . $64.35 $55.00 $1.14
3rd Quarter . . . . . . . . . . $65.80 $58.88 $1.14
4th Quarter . . . . . . . . . . $66.32 $62.00 $1.14
1996: 1st Quarter . . . . . . . . . . $64.90 $64.25 $1.14
2nd Quarter . . . . . . . . . . $64.00 $58.25 $1.14
3rd Quarter (through July 18,
1996) . . . . . . . . . . . $63.00 $63.00 $1.14
----------
*No trades.
The last reported sale of 4.56% Shares on the Philadelphia Stock
Exchange prior to the date hereof occurred on July 26, 1996 at a price of
$63.97 per 4.56% Share.
5% SHARES
The 5% Shares are listed and traded on the Philadelphia Stock Exchange.
The following table sets forth the high and low sales prices of the 5%
Shares on the Philadelphia Stock Exchange and the cash dividends per 5%
Share for the fiscal quarters indicated.
CASH
DIVIDENDS
HIGH LOW PER SHARE
---- --- ---------
1994: 1st Quarter . . . . . . . . . * * $1.25
2nd Quarter . . . . . . . . . $65.50 $62.90 $1.25
3rd Quarter . . . . . . . . . $62.72 $60.88 $1.25
4th Quarter . . . . . . . . . $59.00 $53.50 $1.25
1995: 5th Quarter . . . . . . . . . $63.07 $57.00 $1.25
2nd Quarter . . . . . . . . . $69.45 $64.00 $1.25
3rd Quarter . . . . . . . . . $72.65 $65.50 $1.25
4th Quarter . . . . . . . . . $73.75 $68.00 $1.25
1996: 1st Quarter . . . . . . . . . $75.95 $68.25 $1.25
2nd Quarter . . . . . . . . . $69.25 $68.25 $1.25
3rd Quarter (through July 18,
1996) . . . . . . . . . * * $1.25
----------
*No trades.
The last reported sale of 5% Shares on the Philadelphia Stock Exchange
prior to the date hereof occurred on August 14, 1996 at a price of $69.38
per 5% Share.
6 3/4% SHARES, 7 3/4% SHARES AND ADJUSTABLE RATE SHARES
The 6 3/4% Shares, 7 3/4% Shares and the Adjustable Rate Shares trade in
the over-the-counter market, to the extent trading occurs. Trading of the 6
3/4% Shares, 7 3/4% Shares and the Adjustable Rate Shares has been limited
and sporadic, and information concerning trading prices and volumes is
<PAGE>
difficult to obtain. Depending on the number of Shares of 6 3/4% Shares, 7
3/4% Shares and the Adjustable Rate Shares outstanding after the Offer, the
liquidity of such Shares may be affected adversely.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
DIVIDENDS. The holders of each Series of Preferred are entitled to
receive, when and as declared by the Board, cash dividends at the annual
rate specified for that Series of Preferred, and no more, cumulative and
payable quarterly with respect to each calendar quarterly period, on or
before the last day of each March, June, September and December. No
dividends may be paid on the Company's capital stock except out of its
earned surplus. Under the proposed terms of an indenture relating to the
loan to the Company of the proceeds of the proposed Trust Securities
offering by Delmarva Power Financing I, dividends may not be paid on the
Company's capital stock as long as any payments on the Company's Junior
Subordinated Debentures issued under such indenture have been deferred.
The current annual dividend rate for the Adjustable Rate Shares is $5.50
per share. A new dividend rate will be determined for the period beginning
September 30, 1996.
To date, the Company has made in a timely manner all quarterly dividend
payments on each Series of Preferred.
The record date for the regular quarterly dividend is September 10,
1996, for holders of record of Shares not tendered for sale pursuant to the
Offer. Holders of record of Shares on September 10, 1996, who tender
Shares will be entitled to the regular quarterly dividend, payable
September 30, 1996, regardless of when such tender is made. Holders of
Shares purchased pursuant to the Offer will not be entitled to any
dividends in respect of any later periods.
SECTION 9. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is an investor-owned public utility which provides electric
service to approximately 437,500 customers in Delaware, ten primarily
Eastern Shore counties in Maryland and the Eastern Shore of Virginia in an
area consisting of about 6,000 square miles with a population of
approximately 1,141,000. The Company also provides natural gas service to
approximately 98,000 customers in an area consisting of about 275 square
miles with a population of approximately 470,000 in New Castle County,
Delaware, including the City of Wilmington.
REGISTRATION STATEMENT. The Company and Delmarva Power Financing I, a
special purpose business trust controlled by the Company, have filed a
registration statement (the "Registration Statement") with the Commission
with respect to the proposed offering from time to time of up to
$70,000,000 aggregate liquidation amount of Trust Securities, guaranteed by
the Company to the extent set forth in the Registration Statement.
Following the commencement of the Offer, and subject to market and other
conditions, the Company intends that Delmarva Power Financing I will effect
a public offering of Trust Securities. As set forth in Section 10--"Source
and Amount of Funds," the Company intends to finance the Offer with the
proceeds from the sale of the Trust Securities, which will be loaned by
Delmarva Power Financing I to the Company. To the extent that the proceeds
of the sale of Trust Securities are not sufficient to finance the Offer,
the Company intends to issue debt to finance the Offer.
On August 12, 1996, the Company and Atlantic Energy, Inc. ("AE")
announced they had signed a merger agreement pursuant to which the Company
and AE's subsidiary, Atlantic Electric Company, would become subsidiaries
of a new holding company to be registered under the Public Utility Holding
Company Act of 1935, as amended. AE would be merged into the holding
company. The holders of Shares after the consummation of the proposed
merger would continue to hold preferred stock of the Company. The
transaction has been approved unanimously by the board of directors of each
company and is subject to the approval of the holders of common stock of
each company. Holders of preferred stock of the Company will not have a
right to approve or disapprove of the proposed merger transaction, although
the holders of 6 3/4% Shares, 7 3/4% Shares and Adjustable Rate Shares, and
holders of other series of preferred stock of the Company that are not
listed on a national exchange may have appraisal rights at the time of
merger, which could result in a requirement that the Company purchase such
shares at a value different from the price offered upon tender pursuant to
the Offer. The proposed transaction also is subject to approval by various
regulatory agencies, principally state public utility commissions, the
Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and
the Commission. A filing also must be made with the Department of Justice
and the Federal Trade Commission and the waiting period with respect
<PAGE>
thereto must have expired before the merger may be consummated. Although
the Company cannot predict when all regulatory approvals will be obtained,
both the Company and AE hope that the review process can be completed
within 12 to 18 months.
SELECTED FINANCIAL DATA OF THE COMPANY. Set forth below is certain
financial data for the Company. The historical financial information as of
and for the years ended December 31, 1995, December 31, 1994, and December
31, 1993 has been summarized from the Company's audited consolidated
financial statements contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995. The following selected historical
financial data should be read in conjunction with, and is qualified in its
entirety by reference to, such audited consolidated financial statements
and the notes thereto and Management's Discussion and Analysis therein.
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT RATIOS)
TWELVE MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------ 1996
1993 1994 1995 (UNAUDITED)
---- ---- ---- -----------
Operating Revenues . $970,607 $991,021 $995,103 $1,067,498
Net Income . . . . . $111,076 $108,310 (1) $117,488 $120,106
Earnings Applicable to
Common Stock . . . $101,074 $ 98,940 (1) $107,546 $110,302
Earnings per share of
Common Stock . . . $1.76 $1.67 (1) $1.79 $1.82
Ratio of Earnings to
Fixed Charges(2) . 3.47 3.49 3.54 3.47
Ratio of Earnings to
Fixed Charges and
Preferred
Dividends(2) . . . 2.88 2.85 2.92 2.89
PRO-FORMA
AS OF JUNE 30, 1996 AS OF JUNE 30, 1996
(UNAUDITED) (UNAUDITED)(3)
------------------- -------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ----------
Common Stockholders'
Equity . . . . . . . $928,642 45.6% $928,642 45.6%
Preferred Stock Not
Subject to
Mandatory Redemption 168,085 8.3% 97,710 4.8%
Company Obligated
Mandatorily
Redeemable Preferred
Securities
of Subsidiary Trust . - - 70,000 3.4%
Long-Term Debt(4) . . . 939,769 46.1% 939,769 46.2%
---------- ------ ---------- ------
Total Capitalization . $2,036,496 100.0% $2,036,121 100.0%
____________________
(1) An early retirement offer decreased earnings net of income taxes and
earnings per share by $10.7 million and $0.18, respectively.
(2) For purposes of computing these ratios, earnings have been computed by
adding income taxes and fixed charges to net income. Fixed charges
include gross interest expense and the estimated interest component of
rentals. 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. For 1994, the exclusion of an early retirement offer charge
results in an adjusted ratio of earnings to fixed charges of 3.74 and
an adjusted ratio of earnings to fixed charges and preferred dividends
of 3.05.
(3) Assumes the purchase by the Company of any and all Shares of each
Series of Preferred and the issuance of $70,000,000 aggregate
liquidation amount of Trust Securities.
(4) Excludes $1,522,000 of long-term debt due within one year and includes
$86,500,000 of variable rate demand bonds which the Company intends to
use as a source of long-term financing.
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act, and, in accordance therewith, files
reports and other information with the Commission. The Company also has
filed a Rule 13E-3 Transaction Statement on Schedule 13E-3 and an Issuer
Tender Offer Statement on Schedule 13E-4 with the Commission, which
includes certain additional information relating to the Offer.
Such reports and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. and at its regional offices at 500 West
Madison Street, Chicago, Illinois and 7 World Trade Center, New York, New
York. Copies of such reports and other information also may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549-1004 at prescribed rates. Such reports and
<PAGE>
other information also may be inspected at the New York and Philadelphia
Stock Exchanges, where certain of the Company's securities are listed. The
Company's Schedules 13E-3 and 13E-4 will not be available at the
Commission's Regional Offices.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom this Offer to Purchase is
delivered, upon written or oral request of such person, a copy of the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
and Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996,
and June 30, 1996, other than exhibits to such documents. Such requests
should be directed to Mrs. Carol C. Conrad, Assistant Secretary, 800 King
Street, P.O. Box 231, Wilmington, DE 19899.
SECTION 10. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases all of the Shares of each Series of
Preferred, the total amount required by the Company to purchase all Shares
subject to the Offer will be $102,585,775, exclusive of fees and other
expenses.
As described under Section 9--"Certain Information Concerning the
Company," a Registration Statement has been filed with the Commission with
respect to the proposed offering of Trust Securities by Delmarva Power
Financing I, the proceeds of which will be invested in the Junior
Subordinated Debentures issued by the Company. The Company intends to
finance the Offer with the proceeds from the sale of the Trust Securities,
which will be loaned by Delmarva Power Financing I to the Company. To the
extent the proceeds of the sale of the Trust Securities are not sufficient
to finance the Offer, the Company intends to issue debt to finance the
Offer.
SECTION 11. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES.
The 6 3/4% Shares were issued by the Company in an underwritten public
offering for cash, which was registered under the Securities Act of 1933,
as amended. Such offering, which was consummated on November 4, 1993, was
for 200,000 Shares of 6 3/4% Preferred at a price to the public of $100 per
6 3/4% Share and the Company received aggregate proceeds of $19,825,000
before deducting expenses payable by the Company.
Based upon the Company's records and upon information provided to the
Company by its directors and executive officers, neither the Company nor,
to the Company's knowledge, any director or executive officer of the
Company, or associate of the foregoing, or any subsidiary or affiliate of
the Company has engaged in any transactions involving Shares during the 60
days preceding the date hereof. Neither the Company nor, to the best of the
Company's knowledge, any director or executive officer of Company, or
associate of the foregoing, or, any subsidiary or affiliate of the Company
is a party to any contract, arrangement, understanding or relationship
relating directly or indirectly to the Offer with any other person with
respect to any securities of the Company. As of August 20, 1996, none of
the Company or, to the best of the Company's knowledge, any director or
executive officer of Company, or associate of the foregoing, or any
subsidiary or affiliate of the Company, or any pension, profit sharing or
similar plan of the Company or its affiliates, owns any Shares, and
therefore such persons do not intend to tender or sell any Shares pursuant
to the Offer.
Except as set forth in this Offer to Purchase, neither the Company nor,
to the best of the Company's knowledge, any director or executive officer
of the Company, or any associate of the foregoing, or any subsidiary or
affiliate of the Company, is a party to any contract, understanding or
relationship with any other person relating, directly or indirectly, to, or
in connection with, the Offer with respect to any securities of the Company
(including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any of such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding
of proxies, consents or authorizations).
SECTION 12. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, in its sole discretion and at
any time or from time to time prior to the Expiration Date, to extend the
period of time during which the Offer is open or otherwise amend or
terminate the Offer for any reason with respect to any Series of Preferred
by giving oral or written notice to the Depositary and making a public
announcement thereof. There can be no assurance, however, that the Company
will exercise such right to extend the Offer or, if one Offer is extended,
that any other Offer also will be extended.
<PAGE>
If the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of
the Offer, with respect to a Series of Preferred (including an increase or
decrease in the consideration offered or change in the solicitation fee),
the Company will extend the Offer with respect to such Series of Preferred
to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the
Exchange Act. Under these rules, the minimum period for which the Offer
must remain open following a material change or waiver, other than an
increase or decrease in the consideration offered or change in the
solicitation fee, will depend upon the facts and circumstances, including
the relative materiality of the change or waiver. With respect to an
increase or decrease in the consideration offered or change in the
solicitation fee, the Offer will be extended such that the Offer remains
open for a minimum of ten business days following the public announcement
of such change. During any such extension, all Shares of that Series of
Preferred previously tendered will remain subject to the Offer, except to
the extent that such Shares may be withdrawn as set forth in Section 5--
"Withdrawal Rights."
If, with respect to a Series of Preferred, the Company extends the
period of time during which the Offer is open, is delayed in accepting for
payment or paying for Shares of that Series of Preferred or is unable to
accept for payment or pay for Shares pursuant to the Offer for any reason,
then, without prejudice to the Company's rights under the Offer, the
Depositary may, on behalf of the Company, retain all Shares of that Series
of Preferred tendered, and such Shares may not be withdrawn except as
otherwise provided in this Section 12, subject to Rule 13e-4(f)(5) under
the Exchange Act, which provides that an issuer making a tender offer
either shall pay the consideration offered or return the tendered
securities promptly after the termination or withdrawal of the tender
offer.
THE OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR
ANY OTHER SERIES OF PREFERRED. IF THE COMPANY EXTENDS, AMENDS OR TERMINATES
THE OFFER WITH RESPECT TO ONE SERIES OF PREFERRED FOR ANY REASON, THE
COMPANY WILL HAVE NO OBLIGATION TO EXTEND, AMEND OR TERMINATE THE OFFER FOR
ANY OTHER SERIES OF PREFERRED.
The Company also expressly reserves the right, with respect to any
Series of Preferred, in its sole discretion, upon the occurrence of any of
the conditions specified in Section 7--"Certain Conditions of the Offer,"
to, among other things, terminate the Offer and not accept for payment or
pay for any Shares tendered or, subject to Rule 13e-4(f)(5) under the
Exchange Act, which requires the Company either to pay the consideration
offered or to return the Shares tendered promptly after the termination or
withdrawal of the Offer, to postpone acceptance for payment of or payment
for Shares by, in the case of any termination, giving oral or written
notice of such termination to the Depositary and making a public
announcement thereof.
Extensions and terminations of and amendments to the Offer may be
effected by public announcement. Without limiting the manner in which the
Company may choose to make public announcement of any extension,
termination or amendment, the Company shall have no obligation (except as
otherwise required by applicable law) to publish, advertise or otherwise
communicate any such public announcement, other than by making a release to
the Dow Jones News Service, except in the case of an announcement of an
extension of the Offer with respect to any Series of Preferred, in which
case the Company shall have no obligation to publish, advertise or
otherwise communicate such announcement other than by issuing a notice of
such extension by press release or other public announcement, which notice
shall be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date with respect to
that Series of Preferred. Material changes to information previously
provided to holders of the Shares in this Offer to Purchase or in documents
furnished subsequent thereto will be disseminated to holders of Shares in
compliance with Rule 13e-4(e)(2) promulgated by the Commission under the
Exchange Act.
SECTION 13. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.
EACH HOLDER OF SHARES IS URGED TO CONSULT AND RELY ON SUCH HOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF TENDERING
SHARES PURSUANT TO THE OFFER.
IN GENERAL. The following summary describes certain U.S. federal income
tax consequences relating to the Offer. The summary deals only with Shares
held as capital assets within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"), and does not address tax
consequences that may be relevant to investors in light of particular
<PAGE>
investment or tax circumstances, or to certain types of investors, such as
certain financial institutions or broker-dealers, tax-exempt organizations,
insurance companies, dealers in securities or currencies, or stockholders
holding the Shares as part of a conversion transaction, as part of a hedge
or hedging transaction, or as a position in a straddle for tax purposes.
Each stockholder should consult its own tax advisor with regard to the
Offer and the application of U.S. federal income tax laws, as well as the
laws of any state, local or foreign taxing jurisdiction, to its particular
situation.
CHARACTERIZATION OF THE SALE. A sale of Shares by a stockholder of the
Company pursuant to the Offer will be a taxable transaction for U.S.
federal income tax purposes. Under Section 302 of the Code, a sale of
Shares by a stockholder to the Company pursuant to the Offer will be
treated as a "sale or exchange" of such Shares for U.S. federal income tax
purposes (rather than as a distribution of property to which Section 301 of
the Code applies with respect to the Shares held by the tendering
stockholder) if the receipt of cash upon such sale (a) results in a
"complete redemption" (i.e., a complete termination of the stockholder's
interest) of the Shares and any other stock in the Company owned by the
stockholder, or (b) is "not essentially equivalent to a dividend" with
respect to the stockholder (each as described below).
If either of the above tests is satisfied, and the sale of the Shares
therefore is treated as a "sale or exchange" of such Shares for U.S.
federal income tax purposes, the tendering stockholder will recognize gain
or loss equal to the difference between the amount of cash received by the
stockholder pursuant to the Offer and the stockholder's tax basis in the
Shares sold pursuant to the Offer. Any such gain or loss will be capital
gain or loss, and will be long-term capital gain or loss if the Shares have
been held for more than one year. See "-Section 302 Tests" and
"-Constructive Ownership" below.
If neither of the above tests is satisfied, the tendering stockholder
would be treated as having received a dividend to the extent of the
stockholder's allocable portion of the Company's earnings and profits for
U.S. federal income tax purposes. The cash amount of such dividend would be
included in gross income as an ordinary item in its entirety (without
reduction for the tax basis of the Shares sold pursuant to the Offer), no
loss would be recognized, and the tendering stockholder's basis in the
Shares sold pursuant to the Offer would be added to such stockholder's
basis in its remaining Shares or other stock that it owns in the Company,
if any. If neither of the above tests is satisfied, to the extent the
amount of cash received by the stockholder pursuant to the Offer exceeds
such stockholder's allocable portion of the Company's earnings and profits,
such stockholder's basis in the Shares sold pursuant to the Offer will be
reduced by the amount of such excess. If the amount of cash received by
such stockholder exceeds its basis in such Shares, the stockholder would be
required to treat the excess as gain from the sale or exchange of property.
SECTION 302 TESTS. The receipt of cash by a stockholder will be a
"complete redemption" of all the Shares and any other stock of the Company
owned by the stockholder if either (a) all of the Shares and any other
stock of the Company actually and constructively owned by the stockholder
are sold pursuant to the Offer, or (b) all of the Shares and any other
stock of the Company actually owned by the stockholder are sold pursuant to
the Offer and, with respect to Shares and other stock of the Company
constructively owned by the stockholder which are not sold pursuant to the
Offer, the stockholder waives constructive ownership of all such shares
under procedures described in Section 302(c) of the Code. However, Section
302(c) only permits the waiver of the constructive ownership rules in
limited circumstances. Accordingly, stockholders expecting to waive
constructive ownership should consult their own tax advisors regarding
eligibility and procedural rules applicable to their particular situations.
The receipt of cash by a stockholder will be "not essentially equivalent
to a dividend" if the stockholder's sale of Shares pursuant to the Offer
results in a "meaningful reduction" in the stockholder's interest in the
Company. The sale of Shares to the Company by a tendering stockholder that
does not own, either directly or indirectly under the attribution rules,
any Common Stock of the Company also may qualify as "not essentially
equivalent to a dividend." Also, a stockholder who owns only a small
amount of Common Stock of the Company probably should satisfy the "not
essentially equivalent to a dividend" test. However, because what
constitutes a "meaningful reduction" depends upon a variety of factors,
stockholders expecting to rely upon the "not essentially equivalent to a
dividend" test should consult their own tax advisors as to its application
in their particular situations.
CONSTRUCTIVE OWNERSHIP. In determining whether any of the tests under
Section 302 of the Code are satisfied, stockholders must take into account
not only the Shares and any other stock of the Company which actually are
<PAGE>
owned by the stockholder, but also Shares and any other stock of the
Company which are owned constructively by the stockholder under Section 318
of the Code. Under Section 318 of the Code, a stockholder may own
constructively Shares and any other stock of the Company actually owned,
and in some cases constructively owned, by certain related individuals or
entities and Shares and any other stock of the Company which the
stockholder has the right to acquire by exercise of an option or by
conversion. Contemporaneous dispositions or acquisitions of Shares and any
other stock of the Company by a stockholder or related individuals or
entities may be deemed to be part of a single integrated transaction which
will be taken into account in determining whether any of the tests under
Section 302 of the Code have been satisfied.
CORPORATE STOCKHOLDER DIVIDEND TREATMENT. If a sale of Shares by a
corporate stockholder is treated as a dividend, the corporate stockholder
may be entitled to claim a deduction equal to 70% of the dividend under
Section 243 of the Code, subject to applicable limitations. Corporate
stockholders, however, should consider the effect of Section 246(c) of the
Code which disallows the 70% dividends-received deduction with respect to
stock that is held for 45 days or less or where the corporate stockholder
is under an obligation to make corresponding payments with respect to
substantially similar or related property. For this purpose, the length of
time a taxpayer is deemed to have held stock may be reduced by periods
during which the taxpayer's risk of loss with respect to the stock is
diminished by reason of the existence of certain options or other
transactions. Moreover, under Section 246A of the Code, if a corporate
stockholder has incurred indebtedness directly attributable to an
investment in Shares, the 70% dividends-received deduction may be reduced
by a percentage generally computed based on the amount of such indebtedness
and the total adjusted tax basis in the Shares.
Any amount received by a corporate stockholder pursuant to the Offer
that is treated as a dividend would constitute an "extraordinary dividend"
under Section 1059 of the Code. In addition, where a corporate stockholder
has not held a share of stock for more than two years before the date on
which the Company declares, announces, or agrees to, the amount or payment
of the dividend (whichever is the earliest), such dividend on a share of
stock would constitute an "extraordinary dividend" if it exceeds 5 percent
of the stockholder's basis in such share of stock. For purposes of such
determination, all dividends (including any redemption of stock treated as
a dividend) that are received by the stockholder with respect to such share
and that have ex-dividend dates within the same period of 85 consecutive
days are treated as one dividend. Furthermore, all dividends (including any
redemption of stock treated as a dividend) received with respect to a share
of stock and that have ex-dividend dates within the same one-year period
would constitute an "extraordinary dividend" if the aggregate of such
dividends exceeds 20 percent of the stockholder's adjusted basis in such
stock. As to any "extraordinary dividend" on a share of stock, a corporate
stockholder would be required under Section 1059(a) of the Code to reduce
its basis (but not below zero) in such share by the non-taxed portion of
such aggregate "extraordinary dividend" (i.e., the portion of the dividend
for which a deduction is allowed). If such portion exceeds the
stockholder's tax basis for such share, the stockholder would be required
to treat the excess as gain from the sale of such share of stock. Corporate
stockholders should consult their own tax advisors as to the application of
Section 1059 of the Code to the Offer.
FOREIGN STOCKHOLDERS. The Company will withhold U.S. federal income tax
at a rate of 30% from gross proceeds paid pursuant to the Offer to a
foreign stockholder or his agent, unless the Company determines that a
reduced rate of withholding is applicable pursuant to a tax treaty or that
an exemption from withholding is applicable because such gross proceeds
effectively are connected with the conduct of a trade or business by the
foreign stockholder within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (a) a citizen or resident of the
United States, (b) a corporation, partnership or other entity created or
organized in or under the laws of the United States, or (c) any estate or
trust the income of which is subject to U.S. federal income taxation
regardless of its source. Without definite knowledge to the contrary, the
Company will determine whether a stockholder is a foreign stockholder by
reference to the stockholder's address. A foreign stockholder, subject to
the discussion below, may be eligible to file for a refund of such tax or a
portion of such tax if such stockholder (a) meets the "complete
redemption," or "not essentially equivalent to a dividend" tests described
above, (b) is entitled to a reduced rate of withholding pursuant to a tax
treaty and the Company withheld at a higher rate, or (c) otherwise is able
to establish that no tax or a reduced amount of tax was due. In order to
claim an exemption from withholding on the ground that gross proceeds paid
pursuant to the Offer effectively are connected with the conduct of a trade
or business by a foreign stockholder within the United States or that the
foreign stockholder is entitled to the benefits of a tax treaty, the
foreign stockholder must deliver to the Depositary (or other person who is
otherwise required to withhold U.S. federal income tax) a properly executed
statement claiming such exemption or benefits on Treasury Form 4224
(Exemption from Withholding on Tax on Income Effectively Connected with the
<PAGE>
conduct of a Trade or Business in the United States) or will be required to
deliver to the Depositary Treasury Form 1001 (Ownership, Exemption, or
Reduced Rate Certificate). Such statements may be obtained from the
Depositary. Foreign stockholders are urged to consult their own tax
advisors regarding the application of U.S. federal income tax withholding,
including eligibility for a withholding tax reduction or exemption and the
refund procedures.
Gain or loss from the disposition by a foreign stockholder of the Shares
will be taxable if such Shares constitute a "United States real property
interest" ("USRPI"). As to each foreign stockholder, the stock of a
particular class of preferred stock will constitute a USRPI if at any time
during the shorter of the stockholder's holding period or the 5-year period
ending on the date of disposition of such Shares (i) the Company was a
"United States real property holding corporation" ("USRPHC") and (ii) the
stockholder held more than 5 percent of the fair market value of such class
of preferred stock. The Company is at any time a USRPHC if the fair market
value of its United States real property interests equals or exceeds 50% of
the fair market value of the sum of (i) its United States real property
interests, (ii) its interests in real property located outside the United
States, plus (iii) any other of its assets which are used or held for use
in a trade or business. Based on the facts concerning the Company as of the
date hereof, it is likely that the Company constituted a USRPHC during the
5-year period ending on the Expiration Date of the Offer.
As to any foreign stockholder who has disposed of Shares that constitute
a USRPI, the Company is not required to and will not withhold any U.S.
federal income tax in respect of the disposition of such USRPI.
BACKUP WITHHOLDING. ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS
TO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE
APPLICABLE LETTER OF TRANSMITTAL (OR, IN THE CASE OF A FOREIGN STOCKHOLDER,
FORM W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED
FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE
TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. See Section 6--
"Acceptance for Payment of Shares and Payment of Purchase Price" with
respect to the application of U.S. federal income tax backup withholding.
THE DISCUSSION OF U.S FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY. THE TAX CONSEQUENCES OF A SALE
PURSUANT TO THE OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE
PARTICULAR CIRCUMSTANCES OF THE TENDERING STOCKHOLDER. NO INFORMATION IS
PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE
TRANSACTION CONTEMPLATED BY THE OFFER. STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE
OFFER AND THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED
ABOVE.
SECTION 14. FEES AND EXPENSES.
The Company has retained First Chicago Trust Company of New York as
Depositary, D.F. King & Co., Inc. as Information Agent, and Merrill Lynch &
Co. and Morgan Stanley & Co. Incorporated as Dealer Managers, in connection
with the Offer. The Information Agent and Dealer Managers will assist
stockholders who request assistance in connection with the Offer and may
request brokers, dealers and other nominee stockholders to forward
materials relating to the Offer to beneficial owners. The Company has
agreed to pay the Dealer Managers, upon acceptance for payment of Shares
pursuant to the Offer, a fee of $.50 per Share paid for in the Offer,
except that a fee of $.125 per Share will be paid for any 7 3/4% Share paid
for in the Offer. The Dealer Managers also will be reimbursed by the
Company for their reasonable out-of-pocket expenses, including attorneys'
fees. The Dealer Managers have rendered, are currently rendering and are
expected to continue to render various investment banking and other
advisory services to the Company. They have received, and will continue to
receive, customary compensation from the Company for such services. The
Depositary and the Information Agent will receive reasonable and customary
compensation for their services in connection with the Offer and also will
be reimbursed for reasonable out-of-pocket expenses, including attorneys'
fees. The Company has agreed to indemnify the Depositary, the Information
Agent and the Dealer Managers against certain liabilities in connection
with the Offer, including certain liabilities under the federal securities
laws. Neither the Depositary nor the Information Agent has been retained to
make solicitations, and none of the Depositary, the Information Agent or
<PAGE>
the Dealer Managers have been retained to make recommendations with respect
to the Offer, in their respective roles as Depositary, Information Agent
and Dealer Managers.
The Company will pay to a Soliciting Dealer a solicitation fee of $1.32
per Share for Shares tendered, accepted for payment and paid for pursuant
to the Offer, except that the solicitation fee for the 7 3/4% Shares shall
be $.33 per Share. For purposes of this Section 14, "Soliciting Dealer"
includes (a) any broker or dealer in securities, including the Dealer
Managers in their capacity as a broker or dealer, which is a member of any
national securities exchange or of the NASD, (b) any foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to
the NASD's Rules of Fair Practice in soliciting tenders outside the United
States to the same extent as if it were an NASD member, or (c) any bank or
trust company. No such fee shall be payable to a Soliciting Dealer in
respect of Shares registered in the name of such Soliciting Dealer unless
such Shares are held by such Soliciting Dealer as nominee and such Shares
are being tendered for the benefit of one or more beneficial owners
identified in the applicable Letter of Transmittal or in the applicable
Notice of Solicited Tenders (included in the materials provided to brokers
and dealers). No such fee shall be payable to a Soliciting Dealer with
respect to the tender of Shares by a holder unless the applicable Letter of
Transmittal accompanying such tender designates such Soliciting Dealer. No
such fee shall be payable to the Soliciting Dealer unless the Soliciting
Dealer returns a Notice of Solicited Tenders to the Depositary within three
business days after the applicable Expiration Date. No such fee shall be
payable to a Soliciting Dealer to the extent such Soliciting Dealer is
required for any reason to transfer the amount of such fee to any person
(other than itself). No broker, dealer, bank, trust company or fiduciary
shall be deemed to be the agent of the Company, the Depositary, the
Information Agent or the Dealer Managers for purposes of the Offer.
The Company will pay (or cause to be paid) any stock transfer taxes on
its purchase of Shares, except as otherwise provided in Instruction 6 of
the applicable Letter of Transmittal.
Assuming that all Shares of each Series of Preferred pursuant to the
Offer are tendered and purchased by the Company, it is estimated that the
expenses incurred by the Company in connection with the Offer will be
approximately as set forth below. The Company will be responsible for
paying all such expenses.
Dealer Managers' fees . . . . . . . . . . . . $ 492,000
Solicitation fees . . . . . . . . . . . . . . 1,475,000
Printing and mailing fees . . . . . . . . . . 18,000
Filing fees . . . . . . . . . . . . . . . . . 20,517
Legal, accounting and miscellaneous . . . . . 53,483
---------
Total . . . . . . . . . . . . . . . . . . . $2,059,000
SECTION 15. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders
from, owners of Shares in any jurisdiction in which the Offer or its
acceptance would not be in compliance with the laws of such jurisdiction.
The Company is not aware of any jurisdiction where the making of the Offer
or the tender of Shares would not be in compliance with applicable law. If
the Company becomes aware of any jurisdiction where the making of the Offer
or the tender of Shares is not in compliance with any applicable law, the
Company will make a good faith effort to comply with such law. If, after
such good faith effort, the Company cannot comply with such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares residing in such jurisdiction. In any jurisdiction in
which the securities, Blue Sky or other laws require the Offer to be made
by a licensed broker or dealer, the Offer will be deemed to be made on the
Company's behalf by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
<PAGE>
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: Facsimile By Hand or By Overnight
Tenders & Exchanges Transmission: Courier:
P.O. Box 2569-Suite (201) 222-4720 Tenders & Exchange
4660-DPL or 14 Wall Street
Jersey City, New (201) 222-4721 Suite 4680-8th Floor-DPL
Jersey New York, New York 10005
07303-2569 Confirm Receipt
of Notice of
Guaranteed Delivery
by Telephone:
(201) 222-4707
Any questions or requests for assistance may be directed to the
Information Agent or the Dealer Managers at the respective telephone
numbers and addresses listed below. Requests for additional copies of this
Offer to Purchase, any Letter of Transmittal or other tender offer
materials may be directed to the Information Agent, and such copies will be
furnished promptly at the Company's expense. Each stockholder may also
contact its local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 431-9646
THE DEALER MANAGERS FOR THE OFFER ARE:
MERRILL LYNCH & CO. MORGAN STANLEY & CO. INCORPORATED
World Financial Center 1585 Broadway
250 Vesey Street New York, New York 10036
New York, New York 10281 (800) 223-2440, ext. 1965
(212) 449-4914 (call collect)
Exhibit (a)(2)
LETTER OF TRANSMITTAL
TO ACCOMPANY
SHARES OF % PREFERRED STOCK
($100 PAR VALUE)
CUSIP NO.
OF
DELMARVA POWER & LIGHT COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 21, 1996
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996,
UNLESS THE OFFER IS EXTENDED.
-------------------------------------------------------------------------
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY
By Mail: By Hand or by
Overnight Courier:
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569-Suite 4660-DPL 14 Wall Street-Suite 4680
Jersey City, New Jersey 07303-2569 8th Floor-DPL
New York, New York 10005
THIS LETTER OF TRANSMITTAL IS TO BE USED FOR THE TENDER OF SHARES OF
% PREFERRED ONLY. ANY PERSON DESIRING TO TENDER SHARES OF ANY OTHER SERIES
OF PREFERRED STOCK FOR WHICH THE COMPANY IS MAKING A TENDER OFFER MUST
SUBMIT THE LETTER OF TRANSMITTAL RELATING TO THAT SPECIFIC SERIES.
-------------------------------------------------------------------------
DESCRIPTION OF SHARES OF % PREFERRED STOCK TENDERED
-------------------------------------------------------------------------
Name(s) and Address(es) of Registered Shares Tendered
Holder(s) (If blank, fill in exactly (Attach additional list
as name(s) appear(s) on certificate(s)) if necessary)
-------------------------------------------------------------------------
Total Number
of Shares Number of
Certificate Represented by Shares
Number(s)* Certificate(s) Tendered*
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
TOTAL
--------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered
the full number of Shares represented by the tendered certificate(s).
See Instruction 4.
-------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
DO NOT SEND ANY CERTIFICATES TO THE DEALER MANAGERS, THE INFORMATION AGENT
OR TO DELMARVA POWER & LIGHT COMPANY.
The instructions accompanying this Letter of Transmittal should be
read carefully before the Letter of Transmittal is completed. Questions
and requests for assistance or for additional copies of the Offer to
Purchase or this Letter of Transmittal may be directed to D.F. King & Co.
Inc., the Information Agent, at 77 Water Street, New York, NY 10005,
telephone (800) 431-9646 (toll free) or (212) 269-5550 (collect).
This Letter of Transmittal is to be used only if certificates are to
be forwarded herewith. It is furnished for information only to holders
whose Shares (as defined below) are to be delivered by book-entry transfer
to the Depositary's account at The Depository Trust Company ("DTC") or The
Philadelphia Depository Trust Company ("PDTC") (hereinafter together
referred to as the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth under Section 4--"Procedure for Tendering Shares" in
the Offer to Purchase (as defined below).
Stockholders who cannot deliver certificates for their Shares and all
other documents required hereby to the Depositary or for whose Shares a
confirmation of delivery pursuant to the procedures for book-entry transfer
cannot be received by the Depositary by the Expiration Date (as defined in
the Offer to Purchase) must tender their Shares pursuant to the guaranteed
delivery procedure set forth under Section 4--"Procedure for Tendering
Shares" in the Offer to Purchase. See Instruction 2. Delivery of
documents to the Company or to a Book-Entry Transfer Facility does not
constitute a valid delivery.
(BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
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[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND
COMPLETE THE FOLLOWING:
Name(s) of tendering stockholder(s) ______________________________
Date of execution of Notice of Guaranteed Delivery _______________
Name of institution that guaranteed delivery _____________________
If delivery is by book-entry transfer:
Name of tendering institution ____________________________________
Check applicable box:
[ ] DTC
[ ] PDTC
Account No. ______________________________________________________
Transaction Code No. _____________________________________________
---------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Delmarva Power & Light Company, a
Delaware and Virginia corporation (the "Company"), the above-described
shares (together, the "Shares") pursuant to the Company's offer to purchase
any and all Shares of the % Preferred Stock ($100 par value) (the "
% Preferred") at a price of $ per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated August 21, 1996 (the "Offer to Purchase"), receipt of which
hereby is acknowledged, and in this Letter of Transmittal (which together
constitute the "Offer").
Subject to, and effective upon, acceptance for payment of and payment
for the Shares tendered herewith in accordance with the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended with respect to the % Preferred, the terms and conditions of
any such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and
interest in and to all the Shares that are being tendered hereby and
constitutes and appoints First Chicago Trust Company of New York, as
"Depositary," the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Shares, with full power of substitution
(such power of attorney, being deemed to be an irrevocable power coupled
with an interest), to (a) deliver certificates of such Shares and to accept
such Shares together with all accompanying evidences of transfer and
authenticity, for deposit with the Depositary, (b) present such Shares for
transfer on the books of the Company, (c) issue payment for such Shares
and/or certificates for unpurchased Shares or deliver unpurchased Shares to
the account of the undersigned, and (d) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer. The Depositary will act as agent
for tendering stockholders for the purpose of receiving payment from the
Company and transmitting payment to tendering stockholders.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the
Shares tendered hereby and that, when and to the extent the same are
accepted for payment by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The
undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Shares
tendered hereby.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned, and every
obligation of the undersigned hereunder shall be binding upon the heirs,
legal representatives, successors, assigns, executors and administrators of
the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one
of the procedures described under Section 4--"Procedure for Tendering
Shares" in the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer.
Unless otherwise indicated under "Special Payment Instructions," the
check for the purchase price of any Shares purchased, and/or the return of
any certificates for Shares not tendered or not purchased, will be issued
in the name(s) of the undersigned (and, in the case of Shares tendered by
book-entry transfer, by credit to the account at the Book-Entry Transfer
Facility designated above). Similarly, unless otherwise indicated under
"Special Delivery Instructions," the check for the purchase price of any
Shares purchased and/or the return of any certificates for Shares not
tendered or not purchased (and accompanying documents, as appropriate) will
be mailed to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Payment Instructions" and
"Special Delivery Instructions" are completed, the check for the purchase
price of any Shares purchased and/or the return of any certificates for
Shares not tendered or not purchased will be issued in the name(s) of, and
such check and/or any certificates will be mailed to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if the Company does not accept
for payment any of the Shares so tendered.
----------------------------------- -----------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions (See Instructions 1, 4 and 7)
1, 4, 5, 6 and 7)
To be completed ONLY if the check
To be completed ONLY if the for the purchase price of Shares
check for the purchase price of purchased and/or certificates for
Shares purchased and/or Shares not tendered or not
certificates for Shares not purchased is to be mailed to
tendered or not purchased are someone other than the
to be issued in the name of undersigned or to the undersigned
someone other than the at an address other than that
undersigned. shown below the undersigned's
signature(s).
Issue [ ] check and/or [ ]
certificate(s) to: Mail [ ] check and/or [ ]
certificate(s) to:
Name___________________________
(Please Print) Name ____________________________
(Please Print)
Address _______________________
Address _________________________
_______________________________
(Include Zip Code) _________________________________
(Include Zip Code)
_______________________________
(Taxpayer Identification or
Social Security No.)
---------------------------------- -----------------------------------
------------------------------------------------------------------------
SOLICITED TENDERS
(See Instruction 10)
The Company will pay to any Soliciting Dealer, as defined in
Instruction 10, a solicitation fee of $ per Share for each
Share tendered, accepted for payment and purchased pursuant to the
Offer.
The undersigned represents that the Soliciting Dealer that solicited
and obtained this tender is:
Name of Firm: _________________________________________________________
(Please Print)
Name of Individual Broker or Financial Consultant: ____________________
Identification Number (if known): _____________________________________
Address: ______________________________________________________________
(Include Zip Code)
The following to be completed ONLY if customer's Shares held in
nominee name are tendered.
Name of Beneficial Owner Number of Shares Tendered
(Attach additional list if necessary)
_________________________________ __________________________________
_________________________________ __________________________________
_________________________________ __________________________________
The acceptance of compensation by such Soliciting Dealer will
constitute a representation by it that: (a) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as
amended, and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such
compensation for such solicitation under the terms and conditions of
the Offer to Purchase; (c) in soliciting tenders of Shares, it has used
no solicitation materials other than those furnished by the Company;
and (d) if it is a foreign broker or dealer not eligible for membership
in the National Association of Securities Dealers, Inc. (the "NASD"),
it has agreed to conform to the NASD's Rules of Fair Practice in making
solicitations.
The payment of compensation to any Soliciting Dealer is dependent
on such Soliciting Dealer returning a Notice of Solicited Tenders to
the Depositary.
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SIGN HERE
(Please complete Substitute Form W-9 below)
(Must be signed by the registered holder(s) exactly as
name(s) appear(s) on the stock certificate(s) or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth
full title and see Instruction 5.)
________________________________________________________
________________________________________________________
Signature(s) of Owner(s)
Dated ____________________________________________, 1996
Name(s) ________________________________________________
__________________________________________________
(Please Print)
Capacity (full title) __________________________________
Address ________________________________________________
__________________________________________________
(include Zip Code)
Area Code and Telephone No. ____________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Name of Firm ___________________________________________
Authorized Signature ___________________________________
Name ___________________________________________________
Title __________________________________________________
Address of Firm ________________________________________
________________________________________________________
Area Code and Telephone No. ____________________________
Dated ____________________________________________, 1996
-------------------------------------------------------------------------
THIS LETTER OF TRANSMITTAL IS TO BE USED FOR THE TENDER OF SHARES OF %
PREFERRED ONLY. ANY PERSON DESIRING TO TENDER SHARES OF ANY OTHER SERIES
OF PREFERRED STOCK FOR WHICH THE COMPANY IS MAKING A TENDER OFFER MUST
SUBMIT THE LETTER OF TRANSMITTAL RELATING TO THAT SPECIFIC SERIES.
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program or the Stock Exchange Medallion Program (any of the
foregoing, an "Eligible Institution"). Signatures on this Letter of
Transmittal need not be guaranteed (a) if this Letter of Transmittal is
signed by the registered holder(s) of the Shares tendered herewith and such
holder(s) has not completed the box entitled "Special Payment Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal or (b) if such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of
Transmittal is to be used only if certificates are to be forwarded herewith
pursuant to the procedures set forth under Section 4--"Procedure for
Tendering Shares" in the Offer to Purchase. Either (a) certificates for
all physically delivered Shares, as well as a properly completed and duly
executed Letter of Transmittal and any other documents required by this
Letter of Transmittal, or (b) a confirmation of a book-entry transfer into
the Depositary's account at one of the Book-Entry Transfer Facilities of
all Shares delivered electronically must be received by the Depositary at
one of its addresses set forth on the front page of this Letter of
Transmittal on or prior to the Expiration Date (as defined in the Offer to
Purchase) with respect to the % Preferred. Stockholders who cannot
deliver their Shares and all other required documents to the Depositary on
or prior to the applicable Expiration Date must tender their Shares
pursuant to the guaranteed delivery procedure set forth under Section--
4 "Procedure for Tendering Shares" in the Offer to Purchase. Pursuant to
such procedure: (a) such tender is made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery in the form provided by the Company is received by the
Depositary on or prior to the applicable Expiration Date and (c) either (i)
the certificates for such Shares, together with a properly completed and
duly executed Letter of Transmittal for the % Preferred and any other
documents required by such Letter of Transmittal, or (ii) a confirmation of
a book-entry transfer of such Shares into the Depositary's account at one
of the Book-Entry Transfer Facilities are received by the Depositary no
later than 5:00 p.m., New York City time, on the third New York Stock
Exchange trading day after the Expiration Date, all as provided under
Section 4--"Procedure for Tendering Shares" in the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Section 3--"Number of Shares; Purchase Price; Expiration Date; Receipt of
Dividend; Extension of the Offer" in the Offer to Purchase. By executing
this Letter of Transmittal, the tendering stockholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a
separate schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the
number of Shares that are to be tendered in the box entitled "Number of
Shares Tendered." In such case a new certificate for the remainder of the
Shares represented by the old certificate will be sent in the name of and
to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the "Special Payment Instructions" or "Special Delivery
Instructions" boxes on this Letter of Transmittal, as promptly as
practicable following the expiration or termination of the Offer. All
Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s)
as written on the face of the certificates without alteration, enlargement
or any change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names
on different certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of certificates or separate
stock powers are required unless payment of the purchase price is to be
made to, or Shares not tendered or not purchased are to be registered in
the name of, any person other than the registered holder(s). Signatures of
any such certificates or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or
stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Company of the authority of such person
so to act must be submitted.
6. STOCK TRANSFER TAXES. The Company will pay or cause to be paid any
stock transfer taxes with respect to the sale and transfer of any Shares to
it or its order pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or Shares not tendered or not purchased
are to be registered in the name of, any person other than the registered
holder(s), or if tendered Shares are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of
any stock transfer taxes (whether imposed on the registered holder(s), such
other person or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is
submitted. See Section 6--"Acceptance for Payment of Shares and Payment of
Purchase Price" in the Offer to Purchase. EXCEPT AS PROVIDED IN THIS
INSTRUCTION 6, IT WILL NOT BE NECESSARY TO AFFIX TRANSFER TAX STAMPS TO THE
CERTIFICATES REPRESENTING SHARES TENDERED HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any Shares purchased is to be issued in the name of,
and/or any certificates for Shares not tendered or not purchased are to be
returned to, a person other than the person(s) signing this Letter of
Transmittal or if the check and/or any certificate for Shares not tendered
or not purchased is to be mailed to someone other than the person(s)
signing this Letter of Transmittal or to an address other than that shown
above in the box captioned "Description of Shares Tendered," then the boxes
captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed. A
stockholder tendering Shares by book-entry transfer will have any Shares
not accepted for payment returned by crediting the account maintained by
such stockholder at the Book-Entry Transfer Facility from which such
transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering stockholder is
required to provide the Depositary with either a correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, which is provided
under "Important Tax Information" below, or a properly completed Form W-8.
Failure to provide the information on either Substitute Form W-9 or Form W-
8 may subject the tendering stockholder to 31% Federal income tax backup
withholding on the payment of the purchase price. The box in Part 2 of
Substitute Form W-9 may be checked if the tendering stockholder has not
been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the box in Part 2 is checked and the
Depositary is not provided with a TIN by the time of payment, the
Depositary will withhold 31% on all payments of the purchase price
thereafter until a TIN is provided to the Depositary.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or
requests for assistance may be directed to D.F. King & Co., Inc., as
"Information Agent," or Merrill Lynch & Co. and Morgan Stanley & Co.
Incorporated, as "Dealer Managers," at their respective telephone numbers
and addresses listed below. Requests for additional copies of the Offer to
Purchase, this Letter of Transmittal or other tender offer materials may be
directed to the Information Agent, and such copies will be furnished
promptly at the Company's expense. Stockholders also may contact their
local brokers, dealers, commercial banks or trust companies for assistance
concerning this Offer.
10. SOLICITED TENDERS. The Company will pay a solicitation fee of $
per Share for any Shares tendered, accepted for payment and paid for
pursuant to the Offer, covered by the Letter of Transmittal which
designates, in the box captioned "Solicited Tenders," as having solicited
and obtained the tender, the name of (a) any broker or dealer in
securities, including a Dealer Manager in its capacity as a dealer or
broker, which is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. ("NASD"), (b) any foreign
broker or dealer not eligible for membership in the NASD which agrees to
conform to the NASD's Rules of Fair Practice in soliciting tenders outside
the United States to the same extent as though it were an NASD member, or
(c) any bank or trust company (each of which is referred to herein as a
"Soliciting Dealer"). No such fee shall be payable to a Soliciting Dealer
with respect to the tender of Shares by a holder unless the Letter of
Transmittal accompanying such tender designates such Soliciting Dealer. No
such fee shall be payable to a Soliciting Dealer in respect of Shares
registered in the name of such Soliciting Dealer unless such Shares are
held by such Soliciting Dealer as nominee and such Shares are being
tendered for the benefit of one or more beneficial owners identified on the
Letter of Transmittal or on the Notice of Solicited Tenders (included in
the materials provided to brokers and dealers). No such fee shall be
payable to a Soliciting Dealer with respect to the tender of Shares by the
holder of record, for the benefit of the beneficial owner, unless the
beneficial owner has designated such Soliciting Dealer. If tendered Shares
are being delivered by book-entry transfer, the Soliciting Dealer must
return a Notice of Solicited Tenders to the Depositary within three New
York Stock Exchange trading days after expiration of the Offer to receive a
solicitation fee. NO SUCH FEE SHALL BE PAYABLE TO A SOLICITING DEALER IF
SUCH SOLICITING DEALER IS REQUIRED FOR ANY REASON TO TRANSFER THE AMOUNT OF
SUCH FEE TO ANY PERSON (OTHER THAN ITSELF). No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of the Company, the
Depositary, the Information Agent or the Dealer Managers for purposes of
the Offer.
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any
tender of Shares will be determined by the Company, in its sole discretion,
and its determination shall be final and binding. The Company reserves the
absolute right to reject any and all tenders of Shares that it determines
are not in proper form or the acceptance for payment of or payment for
Shares that may, in the opinion of the Company's counsel, be unlawful. The
Company also reserves the absolute right to waive any of the conditions to
the Offer or any defect or irregularity in any tender of Shares, and the
Company's interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived,
any defects or irregularities in connection with tenders must be cured
within such time as the Company shall determine. None of the Company, the
Dealer Managers, the Depositary, the Information Agent or any other person
shall be under any duty to give notice of any defect or irregularity in
tenders, nor shall any of them incur any liability for failure to give any
such notice. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived.
IMPORTANT: THIS LETTER OF TRANSMITTAL, DULY EXECUTED, TOGETHER WITH
CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS OR CONFIRMATION OF BOOK-ENTRY
TRANSFER MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE APPLICABLE
EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with
either such stockholder's correct TIN on Substitute Form W-9 below or a
properly completed Form W-8. If such stockholder is an individual, the TIN
is his or her social security number. For businesses and other entities,
the TIN is the employer identification number. If the Depositary is not
provided with the correct TIN or properly completed Form W-8, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder with
respect to Shares purchased pursuant to the Offer may be subject to backup
withholding. The Form W-8 can be obtained from the Depositary. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the stockholder. Backup
withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of the tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his or her correct TIN by completing
the Substitute Form W-9 attached hereto certifying that the TIN provided on
Substitute Form W-9 is correct and that (a) the stockholder has not been
notified by the Internal Revenue Service that he or she is subject to
Federal income tax backup withholding as a result of failure to report all
interest or dividends or (b) the Internal Revenue Service has notified the
stockholder that he or she is no longer subject to Federal income tax
backup withholding. Foreign stockholders must submit a properly completed
Form W-8 in order to avoid the applicable backup withholding; provided,
however, that backup withholding will not apply to foreign stockholders
subject to 30% (or lower treaty rate) withholding on gross payments
received pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
guidance on which number to report.
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
-------------------------------------------------------------------------
SUBSTITUTE
PART 1 PLEASE PROVIDE Social security number OR
FORM W-9 YOUR TIN IN THE BOX Employee Identification
AT RIGHT AND CERTIFY Number
BY SIGNING AND DATING
BELOW. TIN ___________________
--------------------------------------------------------
Name (Please Print) _____________ PART 2
Address _________________________ Awaiting TIN
[ ]
City _____________ State _______
Zip Code _______
--------------------------------------------------------
PART 3-CERTIFICATION-UNDER THE PENALTIES OF PERJURY, I
Department of CERTIFY THAT:
the Treasury
Internal (1) The number shown on this form is my correct
Revenue Service taxpayer identification number (or a TIN has not
been issued to me but I have mailed or delivered an
application to receive a TIN or intend to do so in
PAYER'S REQUEST the near future).
FOR
TAXPAYER (2) I am not subject to backup withholding either
IDENTIFICATION because I have not been notified by the Internal
NUMBER (TIN) Revenue Service (the "IRS") that I am subject to
AND backup withholding as a result of a failure to
CERTIFICATION report all interest or dividends or the IRS has
notified me that I am no longer subject to backup
withholding.
(3) All other information provided on this form is
true, correct and complete.
--------------------------------------------------------
SIGNATURE: _______________________________ DATE: _______
You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to
backup withholding because of underreporting interest or
dividends on your tax return.
-------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9.
-------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me and either (1) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administrative Office or (2) I intend to mail or deliver an application
in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments of the
purchase price made to me will be withheld until I provide a number.
SIGNATURE: ___________________________________________ DATE: _________
-------------------------------------------------------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 431-9646
THE DEALER MANAGERS FOR THE OFFER ARE:
MERRILL LYNCH & CO. MORGAN STANLEY & CO.
World Financial Center INCORPORATED
250 Vesey Street 1585 Broadway
New York, New York 10281 New York, New York 10036
(212) 449-4914 (call collect) (800) 223-2440, ext. 1965
Exhibit (a)(3)
DELMARVA POWER & LIGHT COMPANY
Notice of Guaranteed Delivery of
Shares of % Preferred Stock ($100 par value)
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if certificates for the shares of %
Preferred Stock ($100 par value) (the "Shares") are not immediately
available, if the procedure for book-entry transfer cannot be completed on
a timely basis, or if time will not permit all other documents required by
the applicable Letter of Transmittal to be delivered to First Chicago Trust
Company of New York, as Depositary, on or prior to the expiration of the
Offer. Such form may be delivered by hand or transmitted by mail, or by
facsimile transmission, to the Depositary. See Section 4--"Procedure for
Tendering Shares" in the Offer to Purchase. THE ELIGIBLE INSTITUTION (AS
DEFINED HEREIN) WHICH COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO
THE DEPOSITARY AND EITHER THE APPLICABLE LETTER OF TRANSMITTAL AND
CERTIFICATES FOR SHARES MUST BE DELIVERED TO THE DEPOSITARY OR THE
DEPOSITARY MUST RECEIVE CONFIRMATION OF BOOK-ENTRY TRANSFER OF THE SHARES
TO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY OR THE
PHILADELPHIA DEPOSITORY TRUST COMPANY WITHIN THREE NEW YORK STOCK EXCHANGE
TRADING DAYS AFTER THE EXPIRATION DATE. Failure to do so could result in a
financial loss to such Eligible Institution.
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY
By Mail: Facsimile By Hand or By Overnight
Tenders & Exchanges Transmission: Courier:
P.O. Box 2569-Suite 4660-DPL (201) 222-4720 Tenders & Exchanges
Jersey City, New Jersey or 14 Wall Street
07303-2569 (201) 222-4721 Suite 4680-8th Floor-DPL
New York, New York 10005
Confirm Receipt
of Notice
of Guaranteed
Delivery by
Telephone:
(201) 222-4707
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS TO BE USED FOR THE TENDER OF
SHARES OF % PREFERRED ONLY. ANY PERSON DESIRING TO TENDER SHARES OF ANY
OTHER SERIES OF PREFERRED STOCK FOR WHICH THE COMPANY IS MAKING A TENDER
OFFER MUST SUBMIT THE NOTICE OF GUARANTEED DELIVERY RELATING TO THAT
SPECIFIC SERIES.
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an Eligible
Institution under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter
of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to Delmarva Power & Light Company, a
Delaware and Virginia corporation (the "Company"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated
August 21, 1996 (the "Offer to Purchase"), and the applicable Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer"), receipt of which hereby is acknowledged, the number of Shares of
the % Preferred Stock of the Company listed below, pursuant to the
guaranteed delivery procedure set forth in Section 4--"Procedure for
Tendering Shares" in the Offer to Purchase.
---------------------------------- ----------------------------------
Number of % Shares: Signature
---------------------------------- ----------------------------------
Certificate Nos. (if available): Name(s) of Record Holder(s)
(Please Print)
---------------------------------- ----------------------------------
If % Shares will be tendered by Address
book-entry transfer: Name of
Tendering Institution:
================================== ==================================
Account No. at (check one) Area Code and Telephone Number
[ ] The Depository Trust Company
[ ] The Philadelphia Depository Trust
Company
================================== ==================================
-------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program or the Stock Exchange Medallion
Program (each, an "Eligible Institution") guarantees (a) the above-named
person(s) has a net long position in the Shares being tendered within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of
1934, as amended, (b) such tender of Shares complies with Rule 14e-4 and
(c) to deliver to the Depositary at one of its addresses set forth above
(i) certificate(s) for the Shares tendered hereby, in proper form for
transfer, together with a properly completed and duly executed Letter(s)
of Transmittal, with any required signature guarantee(s) and any other
required documents, or (ii) a confirmation of the book-entry transfer of
the Shares tendered hereby into the Depositary's account at The Depository
Trust Company or The Philadelphia Depository Trust Company, all within
three New York Stock Exchange trading days after the Expiration Date.
--------------------------------------------- -----------------------
NAME OF FIRM AUTHORIZED SIGNATURE
---------------------------------------------- -----------------------
ADDRESS NAME
---------------------------------------------- -----------------------
CITY, STATE, ZIP CODE TITLE
----------------------------------------------
AREA CODE AND TELEPHONE NUMBER
DATED: __________________________________, 1996
DO NOT SEND CERTIFICATES WITH THIS FORM. YOUR CERTIFICATES MUST BE SENT
WITH THE APPLICABLE LETTER OF TRANSMITTAL.
-------------------------------------------------------------------------
Exhibit (a)(4)
MERRILL LYNCH & CO. MORGAN STANLEY & CO.
WORLD FINANCIAL CENTER INCORPORATED
250 VESEY STREET 1535 BROADWAY
NEW YORK, NEW YORK 10281 NEW YORK, NEW YORK 10036
DELMARVA POWER & LIGHT COMPANY
OFFER TO PURCHASE ANY OR ALL SHARES OF ITS
3.70% PREFERRED STOCK ($100 PAR VALUE),
4% PREFERRED STOCK ($100 PAR VALUE),
4.20% PREFERRED STOCK ($100 PAR VALUE),
4.28% PREFERRED STOCK ($100 PAR VALUE),
4.56% PREFERRED STOCK ($100 PAR VALUE),
5% PREFERRED STOCK ($100 PAR VALUE),
6 3/4% PREFERRED STOCK ($100 PAR VALUE),
7 3/4% PREFERRED STOCK -- $25 PAR, AND
ADJUSTABLE RATE PREFERRED STOCK, SERIES A ($100 PAR VALUE)
-------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED
-------------------------------------------------------------------------
August 21, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
We have been appointed by Delmarva Power & Light Company (the
"Company") to act as Dealer Managers in connection with the offer by the
Company to purchase, upon the terms and subject to the conditions set forth
in the Offer to Purchase referred to below and the related Letter of
Transmittal (which together constitute the "Offer"), any and all shares of
its 3.70% Preferred Stock ($100 par value) (the "3.70% Shares") at a price
of $58.36 per 3.70% Share, its 4% Preferred Stock ($100 par value) (the "4%
Shares") at a price of $60.88 per 4% Share, its 4.20% Preferred Stock ($100
par value) (the "4.20% Shares") at a price of $66.25 per 4.20% Share, its
4.28% Preferred Stock ($100 par value) (the "4.28% Shares") at a price of
$67.51 per 4.28% Share, its 4.56% Preferred Stock ($100 par value) (the
"4.56% Shares") at a price of $71.92 per 4.56% Share, its 5% Preferred
Stock ($100 par value) (the "5% Shares") at a price of $78.86 per 5% Share,
its 6 3/4% Preferred Stock ($100 par value) (the "6 3/4% Shares") at a
price of $104.65 per 6 3/4% Share, its 7 3/4% Preferred Stock -- $25 Par
(the "7 3/4% Shares") at a price of $28.12 per 7 3/4% Share and its
Adjustable Rate Preferred Stock, Series A ($100 par value) (the "Adjustable
Rate Shares") at a price of $91.50 per Adjustable Rate Share (together, the
"Shares") that are validly tendered and not withdrawn, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August
21, 1996 (the "Offer to Purchase"), and in the applicable Letter of
Transmittal (which, together with the Offer to Purchase, constitutes the
"Offer").
The Company will accept any and all Shares validly tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer, as
described in the Offer to Purchase.
For your information and for forwarding to your clients for whom you
hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. Offer to Purchase for Cash by Delmarva Power & Light Company
dated August 21, 1996;
2. Letter of Transmittal for your use and for the information of
your clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 or Form W-8 providing
information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for the Shares of any series and all other required documents
cannot be delivered to the Depositary by the Expiration Date for such
series (as defined in the Offer to Purchase), or the book-entry transfer of
the Shares cannot be completed by the Expiration Date for such series;
4. A form of letter that may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions and
designation of Soliciting Dealer with regard to the Offer;
5. A letter from the Chairman of Delmarva Power & Light Company that
may be provided to your clients;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9, providing
information relating to backup federal income tax withholding; and
7. Return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996, UNLESS THE OFFER IS EXTENDED.
NEITHER OF THE COMPANY NOR ITS BOARD OF DIRECTORS NOR ITS MANAGEMENT
MAKES ANY RECOMMENDATION TO HOLDERS OF SHARES AS TO WHETHER TO TENDER ALL
OR ANY SHARES IN THE OFFER. HOLDERS OF SHARES ARE URGED TO CONSULT THEIR
FINANCIAL AND TAX ADVISORS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE
IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
The Company will pay a solicitation fee of $1.32 per Share, ($.33 per
Share, in the case of the 7 3/4% Shares), for any Shares tendered by
physically delivering Shares which are accepted pursuant to the Offer and
covered by a Letter of Transmittal which designates, as having solicited
and obtained the tender, the name of (i) any broker or dealer in
securities, including each Dealer Manager in its capacity as a broker or
dealer, which is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. (the "NASD"), (ii) any
foreign broker or dealer not eligible for membership in the NASD which
agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an
NASD member or (iii) any bank or trust company (each of which is referred
to herein as a "Soliciting Dealer"). No solicitation fee shall be payable
to a Soliciting Dealer with respect to the tender of Shares by a holder
unless the Letter of Transmittal accompanying such tender designates such
Soliciting Dealer as such in the box captioned "Solicited Tenders."
If tendered Shares are being delivered by book-entry transfer made to
an account maintained by the Depositary with The Depository Trust Company
or Philadelphia Depository Trust Company, the Soliciting Dealer must return
a Notice of Solicited Tenders to the Depositary within three New York Stock
Exchange trading days after the Expiration Date in order to receive a
solicitation fee. No solicitation fee shall be payable to a Soliciting
Dealer in respect of Shares (i) beneficially owned by such Soliciting
Dealer or (ii) registered in the name of such Soliciting Dealer unless such
Shares are held by such Soliciting Dealer as nominee and such Shares are
being tendered for the benefit of one or more beneficial owners identified
on the Letter of Transmittal or the Notice of Solicited Tenders. No
solicitation fee shall be payable to the Soliciting Dealer with respect to
the tender of Shares by the holder of record, for the benefit of the
beneficial owner, unless the beneficial owner has designated such
Soliciting Dealer. At the time of tendering Shares in book-entry form,
please indicate your request for solicitation fees in the comments field.
NO SOLICITATION FEE SHALL BE PAYABLE TO A SOLICITING DEALER IF SUCH
SOLICITING DEALER IS REQUIRED FOR ANY REASON TO TRANSFER ANY PORTION OF
SUCH FEE TO ANY PERSON (OTHER THAN ITSELF).
No broker, dealer, bank, trust company or fiduciary shall be deemed to
be the agent of any of the Company, the Depositary, the Information Agent
or the Dealer Managers for purposes of the Offer.
The Company, upon request, will reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding materials to their customers. The Company
will pay all stock transfer taxes applicable to the acceptance of Shares
pursuant to the Offer, subject to Instruction 6 of the Letter of
Transmittal.
Soliciting Dealers should take care to ensure proper record-keeping to
document their entitlement to any solicitation fee.
Any inquiries you may have with respect to the Offer should be
addressed to, and additional copies of the enclosed materials may be
obtained from, the Information Agent or the undersigned at the addresses
and telephone numbers set forth on the back cover of the Offer to Purchase.
Very truly yours,
MERRILL LYNCH & CO.
MORGAN STANLEY & CO. INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL
CONSTITUTE YOU THE AGENT OF ANY OF THE COMPANY, THE DEALER
MANAGERS, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 3.70% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED
TO BE COMPLETED ONLY ONLY BY
BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 4% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED
TO BE COMPLETED ONLY ONLY BY
BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 4.20% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED
TO BE COMPLETED ONLY ONLY BY
BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 4.28% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED ONLY TO BE COMPLETED
BY DEPOSITARY ONLY BY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 4.56% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED
TO BE COMPLETED ONLY ONLY BY
BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial owner
whose tender you have solicited. All Shares beneficially owned by a
beneficial owner, whether in one account or several, and in however many
capacities, must be aggregated for purposes of completing the tables below.
Any questions as to what constitutes beneficial ownership should be
directed to the Depositary. If the space below is inadequate, list the
Shares on a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE TABLE HEADED
"TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE
DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE WITHIN THREE NEW YORK STOCK EXCHANGE TRADING
DAYS AFTER THE EXPIRATION OF THE OFFER. ALL QUESTIONS CONCERNING
THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 5% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED BY TO BE COMPLETED BY
THE SOLICITING THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
TO BE COMPLETED
TO BE COMPLETED ONLY ONLY BY
BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________________
Beneficial Owner No.2 ______________________________________________
Beneficial Owner No.3 ______________________________________________
Beneficial Owner No.4 ______________________________________________
Beneficial Owner No.5 ______________________________________________
Total ==============================================
___________________
*Complete if Shares delivered by book-entry transfer. Please submit a
separate VOI Ticket for Shares tendered when the solicitation fee is to be
directed to another Soliciting Dealer. At the time of tendering Shares in
book-entry form, please indicate your request for solicitation fees in the
comments field.
All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the
Depositary, in its sole discretion, which determination will be final and
binding. Neither the Depositary nor any other person will be under any duty
to give notification of any defects or irregularities in any Notice of
Solicited Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial
owner whose tender you have solicited. All Shares beneficially
owned by a beneficial owner, whether in one account or several,
and in however many capacities, must be aggregated for purposes
of completing the tables below. Any questions as to what
constitutes beneficial ownership should be directed to the
Depositary. If the space below is inadequate, list the Shares on
a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE
TABLE HEADED "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO
THE DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE WITHIN THREE NEW YORK
STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER. ALL QUESTIONS CONCERNING THE NOTICES OF
SOLICITED TENDERS SHOULD BE DIRECTED TO THE INFORMATION
AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 6 3/4% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 ______________________________________
Beneficial Owner No.2 ______________________________________
Beneficial Owner No.3 ______________________________________
Beneficial Owner No.4 ______________________________________
Beneficial Owner No.5 ______________________________________
Total ======================================
TO BE COMPLETED
TO BE COMPLETED ONLY BY
ONLY BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 ______________________________________
Beneficial Owner No.2 ______________________________________
Beneficial Owner No.3 ______________________________________
Beneficial Owner No.4 ______________________________________
Beneficial Owner No.5 ______________________________________
Total ======================================
___________________
*Complete if Shares delivered by book-entry transfer. Please
submit a separate VOI Ticket for Shares tendered when the
solicitation fee is to be directed to another Soliciting Dealer.
At the time of tendering Shares in book-entry form, please
indicate your request for solicitation fees in the comments
field.
All questions as to the validity, form and eligibility (including
time of receipt) of Notices of Solicited Tenders will be
determined by the Depositary, in its sole discretion, which
determination will be final and binding. Neither the Depositary
nor any other person will be under any duty to give notification
of any defects or irregularities in any Notice of Solicited
Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial
owner whose tender you have solicited. All Shares beneficially
owned by a beneficial owner, whether in one account or several,
and in however many capacities, must be aggregated for purposes
of completing the tables below. Any questions as to what
constitutes beneficial ownership should be directed to the
Depositary. If the space below is inadequate, list the Shares on
a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE
TABLE HEADED "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO
THE DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE WITHIN THREE NEW YORK
STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER. ALL QUESTIONS CONCERNING THE NOTICES OF
SOLICITED TENDERS SHOULD BE DIRECTED TO THE INFORMATION
AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF 7 3/4% SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 _______________________________________
Beneficial Owner No.2 _______________________________________
Beneficial Owner No.3 _______________________________________
Beneficial Owner No.4 _______________________________________
Beneficial Owner No.5 _______________________________________
Total =======================================
TO BE COMPLETED
TO BE COMPLETED ONLY BY
ONLY BY DEPOSITARY DEPOSITARY
Number of Shares Fee $.33 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 _______________________________________
Beneficial Owner No.2 _______________________________________
Beneficial Owner No.3 _______________________________________
Beneficial Owner No.4 _______________________________________
Beneficial Owner No.5 _______________________________________
Total =======================================
___________________
*Complete if Shares delivered by book-entry transfer. Please
submit a separate VOI Ticket for Shares tendered when the
solicitation fee is to be directed to another Soliciting Dealer.
At the time of tendering Shares in book-entry form, please
indicate your request for solicitation fees in the comments
field.
All questions as to the validity, form and eligibility (including
time of receipt) of Notices of Solicited Tenders will be
determined by the Depositary, in its sole discretion, which
determination will be final and binding. Neither the Depositary
nor any other person will be under any duty to give notification
of any defects or irregularities in any Notice of Solicited
Tenders or incur any liability for failure to give such
notification.
<PAGE>
NOTICE OF SOLICITED TENDERS
List below the number of Shares tendered by each beneficial
owner whose tender you have solicited. All Shares beneficially
owned by a beneficial owner, whether in one account or several,
and in however many capacities, must be aggregated for purposes
of completing the tables below. Any questions as to what
constitutes beneficial ownership should be directed to the
Depositary. If the space below is inadequate, list the Shares on
a separate signed schedule and affix the list to this Notice of
Solicited Tenders. PLEASE DO NOT COMPLETE THE SECTIONS OF THE
TABLE HEADED "TO BE COMPLETED ONLY BY DEPOSITARY."
ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO
THE DEPOSITARY AT THE ADDRESS SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE WITHIN THREE NEW YORK
STOCK EXCHANGE TRADING DAYS AFTER THE EXPIRATION OF THE
OFFER. ALL QUESTIONS CONCERNING THE NOTICES OF
SOLICITED TENDERS SHOULD BE DIRECTED TO THE INFORMATION
AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK
COVER OF THE OFFER TO PURCHASE.
SOLICITED TENDERS OF ADJUSTABLE RATE SHARES
NOT BENEFICIALLY OWNED BY SOLICITING DEALER
TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING
DEALER DEALER
Number of Shares VOI Ticket
Beneficial Owners Tendered Number*
----------------- -------- ------
Beneficial Owner No.1 _______________________________________
Beneficial Owner No.2 _______________________________________
Beneficial Owner No.3 _______________________________________
Beneficial Owner No.4 _______________________________________
Beneficial Owner No.5 _______________________________________
Total =======================================
TO BE COMPLETED
TO BE COMPLETED ONLY BY
ONLY BY DEPOSITARY DEPOSITARY
Number of Shares Fee $1.32 per
Beneficial Owners Accepted Share
----------------- -------- -----
Beneficial Owner No.1 _______________________________________
Beneficial Owner No.2 _______________________________________
Beneficial Owner No.3 _______________________________________
Beneficial Owner No.4 _______________________________________
Beneficial Owner No.5 _______________________________________
Total =======================================
___________________
*Complete if Shares delivered by book-entry transfer. Please
submit a separate VOI Ticket for Shares tendered when the
solicitation fee is to be directed to another Soliciting Dealer.
At the time of tendering Shares in book-entry form, please
indicate your request for solicitation fees in the comments
field.
All questions as to the validity, form and eligibility (including
time of receipt) of Notices of Solicited Tenders will be
determined by the Depositary, in its sole discretion, which
determination will be final and binding. Neither the Depositary
nor any other person will be under any duty to give notification
of any defects or irregularities in any Notice of Solicited
Tenders or incur any liability for failure to give such
notification.
<PAGE>
The undersigned hereby confirms that: (i) it has complied with
the applicable requirements of the Securities Exchange Act of
1934, as amended, and the applicable rules and regulations
thereunder, in connection with such solicitation; (ii) it is
entitled to such compensation for such solicitation under the
terms and conditions of the Offer to Purchase; (iii) in
soliciting tenders of Shares, it has used no soliciting materials
other than those furnished by the Company; and (iv) if it is a
foreign broker or dealer not eligible for membership in the NASD,
it has agreed to conform to the NASD's Rules of Fair Practice in
making solicitations outside the United States to the same extent
as though it were an NASD member.
--------------------------------------------------
(Name of Firm)
--------------------------------------------------
(Authorized Signature)
--------------------------------------------------
(Area Code and Telephone Number)
--------------------------------------------------
(Address)
--------------------------------------------------
(City, State, Zip Code)
--------------------------------------------------
(Attention)
Date:
-------------------------------------------
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL.
Exhibit (a)(5)
DELMARVA POWER & LIGHT COMPANY
OFFER TO PURCHASE FOR CASH
ANY AND ALL
Shares of its 3.70% Preferred Stock ($100 par value),
Shares of its 4% Preferred Stock ($100 par value),
Shares of its 4.20% Preferred Stock ($100 par value),
Shares of its 4.28% Preferred Stock ($100 par value),
Shares of its 4.56% Preferred Stock ($100 par value),
Shares of its 5% Preferred Stock ($100 par value),
Shares of its 6 3/4% Preferred Stock ($100 par value),
Shares of its 7 3/4% Preferred Stock -- $25 Par, and
Shares of its Adjustable Rate Preferred Stock, Series A
($100 par value)
-------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996, UNLESS THE
OFFER IS EXTENDED.
-------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated August
21, 1996 (the "Offer to Purchase"), and applicable Letters of Transmittal
(which together constitute the "Offer") setting forth an offer by Delmarva
Power & Light Company, a Delaware and Virginia corporation (the "Company"),
to purchase any and all of its 3.70% Preferred Stock ($100 par value) (the
"3.70% Shares") at a price of $58.36 per 3.70% Share, its 4% Preferred
Stock ($100 par value) (the "4% Shares") at a price of $60.88 per 4% Share,
its 4.20% Preferred Stock ($100 par value) (the "4.20% Shares") at a price
of $66.25 per 4.20% Share, its 4.28% Preferred Stock ($100 par value) (the
"4.28% Shares") at a price of $67.51 per 4.28% Share, its 4.56% Preferred
Stock ($100 par value) (the "4.56% Shares") at a price of $71.92 per 4.56%
Share, its 5% Preferred Stock ($100 par value) (the "5% Shares") at a price
of $78.86 per 5% Share, its 6 3/4% Preferred Stock ($100 par value) (the
"6 3/4% Shares") at a price of $104.65 per 6 3/4% Share, its 7 3/4%
Preferred Stock -- $25 Par (the "7 3/4% Shares") at a price of $28.12 per
7 3/4 % Share and its Adjustable Rate Preferred Stock, Series A ($100 par
value) (the "Adjustable Rate Shares") at a price of $91.50 per Adjustable
Rate Share (collectively, the "Shares" and each series of Shares, a
"Series of Preferred"), net to the seller in cash, upon the terms and
subject to the conditions of the Offer. The Company will purchase any
and all Shares of each Series of Preferred validly tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer
(as described in the Offer to Purchase).
We are the holder of record of Shares held for your account. A tender of
such Shares can be made only by us as the holder of record and pursuant to
your instructions. The applicable Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Shares held
by us for your account.
We request instructions as to whether you wish us to tender any or all
of the Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer to Purchase and applicable Letter of
Transmittal.
Your attention is invited to the following:
(1) The Offer is for any and all of the Series of each Series of
Preferred. The Offer is not conditioned upon any minimum number of
Shares of any Series of Preferred being tendered. The Offer for Shares
of one Series of Preferred is not conditioned on the Offer for Shares of
any other Series of Preferred, but the Offer is subject to certain other
conditions.
(2) The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, September 20, 1996, unless the Offer is extended with
respect to a Series of Preferred. Your instructions to us should be
forwarded to us in ample time to permit us to submit a tender on your
behalf. If you would like to withdraw your Shares that we have tendered,
you can withdraw them so long as the Offer remains open or at any time
after the expiration of 40 business days from the commencement of the
Offer if such Shares have not been accepted for payment.
(3) Any stock transfer taxes applicable to the sale of Shares to the
Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 6 of each Letter of Transmittal.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS MANAGEMENT MAKE NO
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY OR ALL SHARES
OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER. STOCKHOLDERS MUST MAKE
THEIR OWN DECISIONS AS TO WHETHER TO TENDER SHARES OF ANY SERIES OF
PREFERRED PURSUANT TO THE OFFER AND, IF SO, HOW MANY SHARES TO TENDER.
If you wish to have us tender any or all of your Shares held by us for
your account upon the terms and subject to the conditions set forth in the
Offer, please so instruct us by completing, executing, detaching and
returning to us the instruction form on the detachable part hereof. If you
hold Shares of more than one Series of Preferred, you must specify the
number of Shares tendered for each Series of Preferred. An envelope to
return your instructions to us is enclosed. If you authorize tender of your
Shares, all such Shares will be tendered unless otherwise specified on the
detachable part hereof. Your instructions should be forwarded to us in
ample time to permit us to submit a tender on your behalf by the expiration
of the Offer.
The Offer is being made to all holders of Shares. The Company is not
aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to a valid state statute. If the
Company becomes aware of any valid state statute prohibiting the making of
the Offer, the Company will make a good faith effort to comply with such
statute. If, after such good faith effort, the Company cannot comply with
such statute, the Offer will not be made to, nor will tenders be accepted
from or on behalf of, holders of Shares in such state. In those
jurisdictions where securities, Blue Sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Company by Merrill Lynch & Co. and Morgan Stanley &
Co. Incorporated, as Dealer Managers, or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
<PAGE>
INSTRUCTIONS
WITH RESPECT TO OFFER TO PURCHASE FOR CASH ANY AND ALL SHARES OF
3.70% PREFERRED STOCK ($100 PAR VALUE)
4% PREFERRED STOCK ($100 PAR VALUE)
4.20% PREFERRED STOCK ($100 PAR VALUE)
4.28% PREFERRED STOCK ($100 PAR VALUE)
4.56% PREFERRED STOCK ($100 PAR VALUE)
5% PREFERRED STOCK ($100 PAR VALUE)
6 3/4% PREFERRED STOCK ($100 PAR VALUE)
7 3/4% PREFERRED STOCK -- $25 PAR
ADJUSTABLE RATE PREFERRED STOCK, SERIES A ($100 PAR VALUE)
OF
DELMARVA POWER & LIGHT COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 21, 1996, and the applicable Letter of
Transmittal (which together constitute the "Offer") in connection with the
Offer by Delmarva Power & Light Company (the "Company") to purchase any and
all shares of its 3.70% Preferred Stock ($100 par value) (the "3.70%
Shares") at a price of $58.36 per 3.70% Share, its 4% Preferred Stock ($100
par value) (the "4% Shares") at a price of $60.88 per 4% Share, its 4.20%
Preferred Stock ($100 par value) (the "4.20% Shares") at a price of $66.25
per 4.20% Share, its 4.28% Preferred Stock ($100 par value) (the "4.28%
Shares") at a price of $67.51 per 4.28% Share, its 4.56% Preferred Stock
($100 par value) (the "4.56% Shares") at a price of $71.92 per 4.56% Share,
its 5% Preferred Stock ($100 par value) (the "5% Shares") at a price of
$78.86 per 5% Share, its 6 % Preferred Stock ($100 par value) (the "6 3/4%
Shares") at a price of $104.65 per 6 3/4% Share, its 7 3/4% Preferred Stock
-- $25 Par ("7 3/4% Shares") at a price of $28.12 per 7 3/4% Share and its
Adjustable Rate Preferred Stock, Series A ($100 par value) (the "Adjustable
Rate Shares") at a price of $91.50 per Adjustable Rate Share (together, the
"Shares" and each series of Shares, a "Series of Preferred"), net to the
undersigned in cash.
This will instruct you to tender to the Company the number of shares of
each Series of Preferred indicated below (or, if no number is indicated
below, all shares of such Series of Preferred) which are held by you for
the account of the undersigned, upon the terms and subject to the
conditions of the Offer.
-------------------------------------------------------------------------
(Check only one*)
[ ] Number of 3.70% Shares to be Tendered: _______________ Shares**
[ ] Number of 4% Shares to be Tendered: _______________ Shares**
[ ] Number of 4.20% Shares to be Tendered: _______________ Shares**
[ ] Number of 4.28% Shares to be Tendered: _______________ Shares**
[ ] Number of 4.56% Shares to be Tendered: _______________ Shares**
[ ] Number of 5% Shares to be Tendered: _______________ Shares**
[ ] Number of 6 3/4% Shares to be Tendered: _______________ Shares**
[ ] Number of 7 3/4% Shares to be Tendered: _______________ Shares**
[ ] Number of Adjustable Rate Shares to be _______________ Shares**
Tendered:
Dated: , 1996
-------------------------------------------------------------------------
SIGN HERE
Signature(s): ------------------------------------------------------
Name(s): -----------------------------------------------------------
Address: -----------------------------------------------------------
Social Security or Taxpayer ID No.: --------------------------------
-------------------------------------------------------------------------
____________
* A separate instruction must be completed for each Series of Preferred
tendered.
** Unless otherwise indicated, it will be assumed that all Shares of such
Series of Preferred held by us for your account are to be tendered.
(See Reverse side for additional instructions)
<PAGE>
Please designate in the box below any Soliciting Dealer who solicited your
tender.
-------------------------------------------------------------------------
SOLICITED TENDERS
The undersigned represents that the Soliciting Dealer who solicited and
obtained this tender is:
Name of Firm: _______________________________________________________
(Please Print)
Name of Individual Broker or Financial Consultant: __________________
Identification Number (if known): ___________________________________
Address: ____________________________________________________________
_____________________________________________________________________
(Include Zip Code)
-------------------------------------------------------------------------
Exhibit (a)(6)
August 21, 1996
Dear Stockholder:
Delmarva Power & Light Company (the "Company") is offering
to purchase (the "Offer") any and all shares of each of its 3.70%
Preferred Stock ($100 par value) (the "3.70% Shares") at a price
of $58.36 per 3.70% Share, its 4% Preferred Stock ($100 par
value) (the "4% Shares") at a price of $60.88 per 4% Share, its
4.20% Preferred Stock ($100 par value) (the "4.20% Shares") at a
price of $66.25 per 4.20% Share, its 4.28% Preferred Stock ($100
par value) (the "4.28% Shares") at a price of $67.51 per 4.28%
Share, its 4.56% Preferred Stock ($100 par value) (the "4.56%
Shares") at a price of $71.92 per 4.56% Share, its 5% Preferred
Stock ($100 par value) (the "5% Shares") at a price of $78.86 per
5% Share, its 6 3/4% Preferred Stock ($100 par value) (the
"6 3/4% Shares") at a price of $104.65 per 6 3/4% Share, its
7 3/4% Preferred Stock -- $25 Par (the "7 3/4% Shares") at a price
of $28.12 per 7 3/4% Share and its Adjustable Rate Preferred Stock,
Series A ($100 par value) (the "Adjustable Rate Shares") at a price
of $91.50 per Adjustable Rate Share (together, the "Shares" and
each series of Shares, a "Series of Preferred").
All of the Shares that are properly tendered (and not
withdrawn), subject to the terms and conditions set forth in the
enclosed Offer to Purchase and the applicable Letter of
Transmittal, will be purchased at the applicable price therefor,
net to the selling stockholder in cash. All other Shares that
have been tendered and not purchased will be returned to the
stockholder.
If you do not wish to participate in the Offer, you do not
need to take any action.
The Offer is explained in detail in the enclosed Offer to
Purchase and applicable Letter of Transmittal. A separate Letter
of Transmittal has been prepared for each Series of Preferred and
only the applicable Letter of Transmittal may be used to tender
Shares for that Series of Preferred. If you want to tender your
Shares, the instructions on how to tender Shares are in the
enclosed materials. I encourage you to read carefully these
materials before making any decision with respect to the Offer.
The Offer for Shares of one Series of Preferred is
independent ofthe Offer forShares ofany other Seriesof Preferred.
The Offer gives stockholders the opportunity to sell their
Shares at a premium over the market price and without the usual
transaction costs associated with a market sale.
The Company, its Board of Directors and its management make
no recommendation to any stockholder as to whether to tender any
or all Shares of any Series of Preferred pursuant to the Offer.
Stockholders must make their own decisions as to whether to
tender Shares of any Series of Preferred pursuant to the Offer
and, if so, how many Shares to tender.
Sincerely,
HOWARD E. COSGROVE
Chairman, President
and Chief Executive Officer
Exhibit (a)(7)
DELMARVA POWER
& LIGHT COMPANY NEWS RELEASE
for additional information contact: Edric R. Mason or Carol C. Conrad
(302) 429-3525 (302) 429-3527
FOR IMMEDIATE RELEASE
---------------------
Wilmington, Delaware August 21, 1996 Delmarva Power & Light
Company (Delmarva Power) announced that it is commencing an offer to
purchase any and all of its
i) 50,000 outstanding shares of 3.70% Preferred Stock, par value
$100 per share, at a purchase price of $58.36 per share, net to
the seller in cash;
ii) 40,000 outstanding shares of 4% Preferred Stock, par value $100
per share, at a purchase price of $60.88 per share, net to the
seller in cash;
iii) 50,000 outstanding shares of 4.20% Preferred Stock, par value
$100 per share, at a purchase price of $66.25 per share, net to
the seller in cash;
iv) 50,000 outstanding shares of 4.28% Preferred Stock, par value
$100 per share, at a purchase price of $67.51 per share, net to
the seller in cash;
v) 50,000 outstanding shares of 4.56% Preferred Stock, par value
$100 per share, at a purchase price of $71.92 per share, net to
the seller in cash;
vi) 80,000 outstanding shares of 5% Preferred Stock, par value $100
per share, at a purchase price of $78.86 per share, net to the
seller in cash;
vii) 200,000 outstanding shares of 6 3/4% Preferred Stock, par value
$100 per share, at a purchase price of $104.65 per share, net to
the seller in cash;
viii) 1,600,000 outstanding shares of 7 3/4% Preferred Stock--$25
Par at a purchase price of $28.12 per share, net to the
seller in cash; and
ix) 160,850 outstanding shares of Adjustable Rate Preferred Stock,
Series A, par value $100 per share, at a purchase price of $91.50
per share, net to the seller in cash.
The September 1996 dividend for each series of Preferred Stock
has been declared and is to be paid on September 30, 1996, to holders of
record as of the close of business on September 10, 1996. A holder of
record of Shares on September 10, 1996, who tenders Shares will be entitled
to the September 1996 dividend, regardless of when such tender is made.
Holders of Shares purchased pursuant to the Offer will not be entitled to
any dividends in respect of any later dividend periods.
The Offer for one series of Preferred Stock is independent of the
Offer for any other series of Preferred Stock. The Offers are not
conditioned upon any minimum number of shares of the applicable series of
Preferred Stock being tendered. Each of the Offers is being made only by
means of, and is subject to certain other terms and conditions as set forth
in, the Offer to Purchase, dated August 21, 1996. Each of the Offers and
withdrawal rights will expire at 12:00 midnight, New York City Time, on
September 20, 1996, unless any such Offer with respect to any series of
Preferred Stock is extended.
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell the Preferred Stock. The Offers are made
solely by the Offer to Purchase, dated
August 21, 1996, and the related Letters of Transmittal and are not being
made to (nor will purchases be accepted from or on behalf of) holders of
Preferred Stock residing in any jurisdiction in which the making of the
Offers or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. In any jurisdiction, the securities laws of which
require the Offers to be made by a licensed broker or dealer, the Offers
shall be deemed made on behalf of Delmarva Power by one or more brokers or
dealers licensed under the laws of such jurisdiction.
The dealer managers for the Offers are Merrill Lynch & Co. and
Morgan Stanley & Co. Incorporated and the Depositary for the tendered
Shares will be First Chicago Trust Company of New York. Questions or
requests for assistance may be directed to D.F. King & Co., Inc., the
Information Agent, at 77 Water Street, New York, New York 10005 (telephone
(800) 431-9646) or Merrill, Lynch & Co. at (212) 449-4914 (call collect) or
Morgan Stanley & Co. Incorporated at (800) 223-2440, ext. 1965.
Delmarva Power is an investor-owned public utility which provides
electric service to approximately 437,500 customers in Delaware, ten
primarily Eastern Shore counties in Maryland and the Eastern Shore area of
Virginia and natural gas service to approximately 98,000 customers in
northern Delaware, including the City of Wilmington.
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Shares. The Offer is made
solely by the Offer to Purchase dated August 21, 1996, and the
applicable Letter of Transmittal. The Offer is being made to all
holders of Shares; provided, that the Offer is not being made to,
nor will tenders be accepted from or on behalf of, holders of
Shares in any jurisdiction in which making or accepting the Offer
would violate that jurisdiction's laws. In those jurisdictions
whose securities, Blue Sky or other laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of the Company by Merrill Lynch & Co., Morgan
Stanley & Co. Incorporated or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
DELMARVA POWER & LIGHT COMPANY
ANY AND ALL OF ITS
3.70% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $58.36 PER SHARE
CUSIP NO. 247109 200
4% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $60.88 PER SHARE
CUSIP NO. 247109 309
4.20% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $66.25 PER SHARE
CUSIP NO. 247109 408
4.28% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $67.51 PER SHARE
CUSIP NO. 247109 507
4.56% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $71.92 PER SHARE
CUSIP NO. 247109 606
5% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $78.86 PER SHARE
CUSIP NO. 247109 705
6 3/4% PREFERRED STOCK
($100 PAR VALUE) AT A PURCHASE PRICE OF $104.65 PER SHARE
CUSIP NO. 247109 770
7 3/4% PREFERRED STOCK -- $25 PAR
AT A PURCHASE PRICE OF $28.12 PER SHARE
CUSIP NO. 247109 788
ADJUSTABLE RATE PREFERRED STOCK, SERIES A
($100 PAR VALUE) AT A PURCHASE PRICE OF $91.50 PER SHARE
CUSIP NO. 247109 820
Delmarva Power & Light Company, a Delaware and Virginia
corporation (the "Company"), invites the holders of the above-
referenced Preferred Stock (each such series a "Series of
Preferred") to tender their shares of such stock (the "Shares")
at the respective prices set forth above, net to the seller in
cash and upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated August 21, 1996 (the "Offer to
Purchase") and in the applicable Letter of Transmittal (which,
together with the Offer to Purchase, constitutes the "Offer" with
respect to the applicable Series of Preferred). The Company will
purchase all shares validly tendered and not withdrawn, upon the
terms and subject to the conditions of the Offer.
On July 25, 1996, the Board of Directors of the Company
declared dividends on the Company's preferred stock. The regular
quarterly dividend for each Series of Preferred will be paid on
September 30, 1996, to holders of record as of the close of
business on September 10, 1996. A holder of record of Shares on
September 10, 1996, who tenders Shares will be entitled to the
regular quarterly dividend, regardless of when such tender is
made. Holders of Shares purchased pursuant to the Offer will not
be entitled to any dividends in respect of any later dividend
periods.
THE OFFER HAS SEPARATE LETTERS OF TRANSMITTAL AND SEPARATE
NOTICES OF GUARANTEED DELIVERY FOR EACH SERIES OF PREFERRED. THE
OFFER FOR ONE SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR
ANY OTHER SERIES OF PREFERRED. THE OFFER IS NOT CONDITIONED UPON
ANY MINIMUM NUMBER OF SHARES OF THE APPLICABLE SERIES OF
PREFERRED BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO
CERTAIN OTHER CONDITIONS. SEE SECTION 7-"CERTAIN CONDITIONS OF
THE OFFER" IN THE OFFER TO PURCHASE.
--------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, SEPTEMBER 20, 1996, UNLESS THE
OFFER IS EXTENDED.
---------------------------------------------------------------------
Upon the terms and subject to the conditions described in
the Offer to Purchase and in the applicable Letter of
Transmittal, the Company will purchase Shares of a Series of
Preferred validly tendered and not withdrawn on or prior to the
Expiration Date (as defined in the Offer to Purchase) with
respect to that Series of Preferred.
The Company is making the Offer because it believes that the
purchase of Shares is economically attractive to the Company. In
addition, the Offer gives stockholders the opportunity to sell
their Shares at a premium over market price and without the usual
transaction costs associated with a market sale.
THE COMPANY, ITS BOARD OF DIRECTORS AND ITS MANAGEMENT MAKE
NO RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ANY
OR ALL SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS AS TO WHETHER TO TENDER
SHARES OF ANY SERIES OF PREFERRED PURSUANT TO THE OFFER AND, IF
SO, HOW MANY SHARES TO TENDER.
The Company reserves the right, at any time or from time to
time prior to the Expiration Date, to extend the period of time
during which the Offer is open or otherwise amend or terminate
the Offer for any reason with respect to a Series of Preferred by
giving oral or written notice to First Chicago Trust Company of
New York as "Depositary" and making a public announcement
thereof.
THE COMPANY WILL PAY TO A SOLICITING DEALER (AS DEFINED IN
THE OFFER TO PURCHASE) A SOLICITATION FEE OF $1.32 PER SHARE FOR
ANY SHARES TENDERED, ACCEPTED FOR PAYMENT AND PAID FOR PURSUANT
TO THE OFFER, EXCEPT THAT THE SOLICITATION FEE FOR THE 7 3/4%
SHARES SHALL BE $.33 PER SHARE. SEE SECTION 14-"FEES AND
EXPENSES" IN THE OFFER TO PURCHASE.
Tenders of Shares of a Series of Preferred made pursuant to
the Offer may be withdrawn at any time on or prior to the
Expiration Date with respect to such Series of Preferred.
Thereafter, such tenders are irrevocable, except that they may be
withdrawn after 12:00 midnight, October 18, 1996, unless
theretofore accepted for payment by the Company as provided in
the Offer to Purchase. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be
received timely by the Depositary at one of the addresses or
facsimile numbers set forth on the back cover of the Offer to
Purchase and must specify the name of the person who tendered the
Shares of the applicable Series of Preferred to be withdrawn and
the number of Shares to be withdrawn. If the Shares of the
applicable Series of Preferred to be withdrawn have been
delivered to the Depositary, a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution (as defined in
the Offer to Purchase) (except in the case of Shares tendered by
an Eligible Institution) must be submitted prior to the release
of such Shares. In addition, such notice must specify, in the
case of Shares tendered by delivery of certificates, the name of
the registered holder (if different from that of the tendering
stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the
case of Shares tendered by book-entry transfer, the name and
number of the account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase) to be credited
with the withdrawn Shares and the name of the registered holder
(if different from the name of such account). Withdrawals may
not be rescinded, and Shares withdrawn thereafter will be deemed
not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by again following one of the
procedures described in Section 4-"Procedure for Tendering
Shares" in the Offer to Purchase at any time prior to the
applicable Expiration Date.
The Company will be deemed to have purchased tendered Shares
validly tendered and not withdrawn if and when it gives oral or
written notice to the Depositary of its acceptance for payment of
Shares.
THE INFORMATION REQUIRED TO BE DISCLOSED BY RULE 13E-3(E)(1)
AND RULE 13E-4(D)(1) OF THE GENERAL RULES AND REGULATIONS UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS CONTAINED IN
THE OFFER TO PURCHASE AND IS INCORPORATED HEREIN BY REFERENCE.
Copies of the Offer to Purchase and the applicable Letter of
Transmittal are being mailed to registered holders of Shares and
will be furnished to brokers, banks and similar persons whose
names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as
participants in a Book-Entry Transfer Facility's security
position listing for subsequent transmittal to beneficial owners
of Shares.
THE OFFER TO PURCHASE AND THE APPLICABLE LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ
CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
Any questions or requests for assistance may be directed to
the Information Agent or the Dealer Managers at their respective
telephone numbers and addresses listed below. Requests for
additional copies of the Offer to Purchase, the applicable Letter
of Transmittal or other tender offer materials may be directed to
the Information Agent, and such copies will be furnished promptly
at the Company's expense. Holders of Shares may also contact
their local broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
Information on the Offer is available from "MCM Corporate
Watch Services" on Telerate page 41996.
The Information Agent for the Offer is:
D.F. KING & CO. INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: (800) 431-9646
The Dealer Managers for the Offer are:
MERRILL LYNCH & CO. MORGAN STANLEY & CO.
INCORPORATED
World Financial Center 1585 Broadway
250 Vesey Street New York, New York 10036
New York, New York 10281 (800) 223-2440, ext. 1965
(212) 449-4914 (Call Collect)
August 21, 1996
GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE
Purpose of Form - A person who is required to file an information return
with the IRS must obtain your correct TIN to report income paid to you,
real estate transactions, mortgage interest you paid, the acquisition or
abandonment of secured property, or contributions you made to an IRA. Use
Form W-9 to furnish your correct TIN to the requester (the person asking
you to furnish your TIN) and, when applicable, (1) to certify that the TIN
you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and
(3) to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
Note:
If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form.
How To Obtain a TIN - If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration,
or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in
the space for the TIN in Part 1 (or check the box 2 of Substitute Form W-
9), sign and date the form, and give it to the requester. Generally, you
must obtain a TIN and furnish it to the requester by the time of payment.
If the requester does not receive your TIN by the time of payment, backup
withholding, if applicable, will begin and continue until you furnish your
TIN to the requester.
Note:
Writing "Applied for" (or checking the box 2 of the Substitute Form W-
9) on the form means that you have already applied for a TIN or that
you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include
your TIN, sign and date the form, and give it to the requester.
What Is Backup Withholding? - Persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that
could be subject to backup withholding include interest, dividends, broker
and barter exchange transactions, rents, royalties, nonemployee
compensation, and certain payments from fishing boat operators, but do not
include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your
tax return, your payments will not be subject to backup withholding.
Payments you receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN, or
3. You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your
tax return (for reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend
accounts opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable
interest, dividend, broker, or barter exchange accounts opened after
1983, or broker accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and
payments are exempt from backup withholding and information reporting.
See Payees and Payments Exempt From Backup Withholding, below, and Example
Payees and Payments under Specific Instructions, below, if you are an
exempt payee.
Payees and Payments Exempt From Backup Withholding - The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are
exempt except item (9). For broker transactions, payees listed in (1)
through (13) and a person registered under the Investment Advisers Act of
1940 who regularly acts as a broker are exempt. Payments subject to
reporting under sections 6041 and 6041A are generally exempt from backup
withholding only if made to payees described in items (1) through (7),
except a corporation that provides medical and health care services or
bills and collects payments for such services is not exempt from backup
withholding or information reporting. Only payees described in items (2)
through (6) are exempt from backup withholding for barter exchange
transactions, patronage dividends, and payments by certain fishing boat
operations.
(1) A corporation. (2) An organization exempt from tax under section
501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The
United States or any of its agencies or instrumentalities. (4) A state,
the District of Columbia, a possession of the United States, or any of
their political subdivisions or instrumentalities. (5) A foreign
government or any of its political subdivisions, agencies, or
instrumentalities. (6) An international organization or any of its
agencies or instrumentalities. (7) A foreign central bank of issue. (8) A
dealer in securities or commodities required to register in the United
States or a possession of the United States. (9) A futures commission
merchant registered with the Commodity Futures Trading Commission. (10) A
real estate investment trust. (11) An entity registered at all times
during the tax year under the Investment Company Act of 1940. (12) A
common trust fund operated by a bank under section 584(a). (13) A
financial institution. (14) A middleman known in the investment community
as a nominee or listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt
from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding include the following:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include
the following:
o Payments of interest on obligations issued by individuals.
Note:
You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and
you have not provided your correct TIN to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042,
6044, 6045, 6049, 6050A, and 6050N, and their regulations.
PENALTIES
Failure To Furnish TIN - If you fail to furnish your correct TIN to a
requester, you will be subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding - If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information - Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
Misuse of TINs - If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIAL INSTRUCTIONS
Name - If you are an individual, you must generally provide the name shown
on your Social Security card. However, if you have changed your last name,
for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last
name shown on your Social Security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown
on your Social Security card and/or as it was used to apply for your EIN on
Form SS-4.
SIGNING THE CERTIFICATION
1. Interest, Dividend, Broker and Barter Exchange Amounts Opened Before
1984 and Broker Accounts Considered Active During 1983. You are
required to furnish your correct TIN, but you are not required to sign
the certification.
2. Interest, Dividend, Broker and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983. You must
sign the certification or backup withholding will apply. If you are
subject to backup withholding and you are merely providing your
correct TIN to the requestor, you must cross out item 2 in the
certification before signing the form.
3. Real Estate Transactions. You must sign the certification. You may
cross out item 2 of the certification.
4. Other Payments. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been
notified of an incorrect TIN. Other payments include payments made in
the course of the requester's trade or business for rents, royalties,
goods (other than bills for merchandise), medical and health care
services, payments to a nonemployee for services (including attorney
and accounting fees), and payments to certain fishing boat crew
members.
5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. You are required to furnish your
correct TIN, but you are not required to sign the certification.
6. Exempt Payees and Payments. If you are exempt from backup
withholding, you should complete this form to avoid possible erroneous
backup withholding. Enter your correct TIN in Part 1, write "EXEMPT"
in the block in Part 2, and sign and date the form. If you are a
nonresident alien or foreign entity not subject to backup withholding,
give the requester a complete Form W-8, Certificate of Foreign Status.
7. TIN "Applied for." Follow the instructions under How To Obtain a TIN
on page 1, and sign and date this form.
Signature. - For a joint account, only the person whose TIN is shown
in Part 1 should sign.
Privacy Act Notice - section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report
interest, dividend, and certain other income paid to you, mortgage interest
you paid, the acquisition or abandonment of secured property, or
contributions you made to an IRA. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividends,
and certain other payments to a payee who does not furnish a TIN to a
payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
For this type of account: Give name and SSN of:
1. Individual . . . . . . . The individual
2. Two or more individuals The actual owner of the
(joint account) . . . . account or, if combined funds,
the first individual on the
account (1)
3. Custodian account of a
minor (Uniform Gift to
Minors Act) . . . . . . The minor (2)
4. a. The usual revocable
savings trust (grantor is
also trustee) . . . . . The grantor-trustee (1)
b. So-called trust
account that is not a
legal or valid trust
under state law . . . . The actual owner (1)
5. Sole proprietorship . . The owner (3)
For this type of account: Give name and EIN of:
6. Sole proprietorship . . The owner (3)
7. A valid trust, estate, or
pension trust . . . . . Legal entity (4)
8. Corporate . . . . . . . The corporation
9. Association, club,
religious, charitable,
educational or other tax-
exempt organization . . The organization
10. Partnership . . . . . . The partnership
11. A broker or registered
nominee . . . . . . . . The broker or nominee
12. Account with the
Department of Agriculture
in the name of a public
entity (such as a state
or local government,
school district or
prison) that receives
agriculture program
payments . . . . . . . . The public entity
____________
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name.
You may use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or
trustee unless the legal entity itself is not designated in the
account title.)
Note:
If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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, 1995
/ / 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
800 KING STREET, P. O. BOX 231
WILMINGTON, DELAWARE 19899
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 302-429-3089
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------------------------------- --------------------------------------------------------
First Mortgage Bonds (Series issued prior to New York Stock Exchange and Philadelphia Stock Exchange
1968)
Preferred Stock, Cumulative, Par Value $100.00 Philadelphia Stock Exchange
(Series issued prior to 1978)
Common Stock, Par Value $2.25 New York Stock Exchange and Philadelphia Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 February 29, 1996 was $1,341,205,862.
As of February 29, 1996, there were issued and outstanding 60,761,765 shares
of the registrant's common stock, Par Value $2.25.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
<S> <C>
PART OF FORM 10-K DOCUMENT INCORPORATED BY REFERENCE
- -------------------- --------------------------------------------------------------------------------------------
I (Item I -- Segment Portions of the 1995 Annual Report to Stockholders of Delmarva Power & Light Company
Information) and
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 30, 1996, which Definitive Proxy Statement is
expected to be filed with the Securities and Exchange Commission on or about April 25, 1996
IV Portions of the 1995 Annual Report to Stockholders of Delmarva Power & Light Company
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
-------
PART I
Glossary................................................................ iii
Item 1. Business
The Company............................................. I-1
Segment Information..................................... I-1
Operating Statistics.................................... I-1
Strategic Plans for Competition......................... I-1
Electric Operations..................................... I-3
Installed Capacity................................. I-3
Power Pool......................................... I-3
Reserve Margin..................................... I-4
Energy Supply Plan................................. I-4
Power Plants............................................ I-5
Nuclear............................................ I-5
Peach Bottom Units................................. I-6
Salem Units........................................ I-7
Life Extensions.................................... I-9
Purchased Power......................................... I-9
Cost of Output for Load................................. I-10
Fuel Supply for Electric Generation..................... I-10
Coal............................................... I-10
Oil................................................ I-10
Gas................................................ I-10
Nuclear............................................ I-11
Gas Operations.......................................... I-12
Subsidiaries............................................ I-13
Regulatory and Rate Matters............................. I-13
Base Rate Proceedings.............................. I-13
Fuel Adjustment Clauses............................ I-13
Other Regulatory Matters........................... I-14
Construction and Financing Program...................... I-16
Environmental Matters................................... I-17
Construction Expenditures.......................... I-17
Clean Air Act...................................... I-17
Salem Operating Permit............................. 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-21
Executive Officers of the Registrant.................... I-21
Item 2. Properties..................................................... I-23
Item 3. Legal Proceedings.............................................. I-24
Item 4. Submission of Matters to a Vote of Security Holders............ I-24
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... II-1
Item 6. Selected Financial Data........................................ II-1
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PAGE
------
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
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-4
</TABLE>
ii
<PAGE>
GLOSSARY
The following glossary lists the abbreviations used in this report.
<TABLE>
<CAPTION>
<S> <C>
TERM DEFINITION
- ------------------------------------------ ---------------------------------------------------------------------
AFUDC..................................... Allowance For Funds Used During Construction
BWR....................................... Boiling Water Reactor
Charter................................... Restated Certificate and Articles of Incorporation
Clean Air Act............................. Clean Air Act Amendments of 1990
Company................................... Delmarva Power & Light Company
COPCO..................................... Conowingo Power Company
CT........................................ Combustion Turbine
D&D Fund.................................. Decontamination & Decommissioning Fund
Delcap.................................... Delmarva Capital Investments, Inc.
DNREC..................................... Delaware Department of Natural Resources and Environmental Control
DOE....................................... United States Department of Energy
DPSC...................................... Delaware Public Service Commission
EDR....................................... Economic Development Rate
EMF....................................... Electric and Magnetic Fields
Energy Act................................ Energy Policy Act of 1992
EPA....................................... United States Environmental Protection Agency
ESA....................................... Expanded Site Assessment
FERC...................................... Federal Energy Regulatory Commission
FGD....................................... Flue Gas Desulfurization
GE........................................ General Electric Company
ISO....................................... Independent System Operator
kV........................................ Kilovolts
kWh....................................... Kilowatt-hour
LLRW...................................... Low Level Radioactive Waste
Mcf....................................... Thousand Cubic Feet
MD&A...................................... Management's Discussion and Analysis of Financial Condition and
Results of Operations
MDE....................................... Maryland Department of the Environment
Mortgage.................................. Mortgage and Deed of Trust
MOU....................................... Memorandum of Understanding
MPSC...................................... Maryland Public Service Commission
MW........................................ Megawatt
MWh....................................... Megawatt-hour
NCR....................................... Negotiated Contract Rate
NJDEPE.................................... New Jersey Department of Environmental Protection and Energy
NOPR...................................... Notice of Proposed Rulemaking
NOTC...................................... Northeast Ozone Transport Commission
NOTR...................................... Northeast Ozone Transport Region
NOx....................................... Oxides of Nitrogen
NPDES..................................... National Pollutant Discharge Elimination System
NRC....................................... Nuclear Regulatory Commission
NWPA...................................... Nuclear Waste Policy Act of 1982
PADEP..................................... Pennsylvania Department of Environmental Protection
Peach Bottom.............................. Peach Bottom Atomic Power Station
PECO...................................... PECO Energy Company
Pine Grove................................ Pine Grove Landfill, Inc.
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TERM DEFINITION
- ------------------------------------------ ---------------------------------------------------------------------
PJM Interconnection....................... Pennsylvania-New Jersey-Maryland Interconnection Association
PPPP...................................... Power Plant Performance Program
PRP....................................... Potentially Responsible Party
PSE&G..................................... Public Service Electric and Gas Company
PURPA..................................... Public Utility Regulatory Policies Act of 1978
PWR....................................... Pressurized Water Nuclear Reactors
RACT...................................... Reasonably Available Control Technology
Salem..................................... Salem Nuclear Generating Station
SALP...................................... Systematic Assessment of Licensee Performance
SEC....................................... Securities and Exchange Commission
SIT....................................... Special Inspection Team
SO2....................................... Sulfur Dioxide
Star...................................... Star Enterprise
VSCC...................................... Virginia State Corporation Commission
Westinghouse.............................. Westinghouse Electric Corporation
</TABLE>
iv
<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. On June 19, 1995, the Company acquired Conowingo
Power Company (COPCO), the Maryland retail electric subsidiary of PECO Energy
Company (PECO). COPCO was merged into the Company and is now being operated as
the Conowingo District. For a discussion of the Company's purchase of COPCO,
refer to Notes 4 and 12 to the Consolidated Financial Statements of the
Company's 1995 Annual Report to Stockholders filed as Exhibit 13.
The Company is predominantly a public utility that provides electric and gas
service. The Company provides electric service to retail (residential,
commercial, and industrial) and wholesale (resale) customers in Delaware, ten
primarily Eastern Shore counties in Maryland, and the Eastern Shore area of
Virginia in an area consisting of about 6,000 square miles with a population of
approximately 1.1 million. In 1995, 90% of the Company's operating revenues were
derived from the sale of electricity. The Company provides gas service to retail
and transportation customers in an area consisting of about 275 square miles
with a population of approximately 470,000 in northern Delaware, including the
City of Wilmington.
In addition, the Company and its wholly-owned subsidiaries are engaged in
nonutility activities. The Company is developing and marketing energy-related
products and services, as discussed in the "Strategic Plans For Competition"
section of Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) of the Company's 1995 Annual Report to Stockholders
filed as Exhibit 13. The subsidiaries, also incorporated in Delaware, include
Delmarva Energy Company, Delmarva Industries, Inc., Delmarva Services Company,
and Delmarva Capital Investments, Inc. (Delcap). For a discussion of the
Company's subsidiaries, refer to "Subsidiaries" on page I-13.
SEGMENT INFORMATION
See Note 19 to the Consolidated Financial Statements of the Company's 1995
Annual Report to Stockholders filed as Exhibit 13.
OPERATING STATISTICS
A Schedule of Operating Statistics for the three years ended December 31,
1995, can be found on page IV-3. This schedule provides electric and gas sales
and revenue data.
STRATEGIC PLANS FOR COMPETITION
Competition exists and is expected to increase for certain electric and gas
energy markets historically served exclusively by regulated utilities. In recent
years, changing laws and governmental regulations permitting competition from
other utilities as well as nonregulated energy suppliers have prompted some
customers to use self-generation or alternative sources to meet their electric
and gas needs. The transition from strictly regulated to competitive resale and
retail markets is changing the structure of the utility industry and the way in
which it conducts business. To address the issues of deregulation and increased
competition, the Company also is changing the way that it views and manages its
business.
ELECTRIC RESALE 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.
I-1
<PAGE>
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 resale electricity producers. The Energy Act also
provided for the creation of a new category of electric power producers called
exempt wholesale generators.
In March 1995, the FERC issued a Notice of Proposed Rulemaking (NOPR) which,
if adopted, would require electric utilities to provide open access to their
transmission systems under non-discriminatory tariffs available to all wholesale
sellers and buyers of electricity. Utilities would be required to offer
transmission services comparable to the services they provide to themselves and
to take transmission services under the same tariffs applied to their
transmission customers. The NOPR also provides that stranded costs resulting
from opening retail markets are subject to the jurisdiction of state regulatory
commissions. For a discussion of the Company's actions taken in response to the
NOPR, refer to "Power Pool" on page I-3 and "Comparable Use Transmission Tariff"
on page I-15.
For a discussion of the Company's resale business and the impact of
competition on stranded costs, refer to the "Strategic Plans for Competition"
section of the MD&A of the Company's 1995 Annual Report to Stockholders filed as
Exhibit 13.
ELECTRIC RETAIL BUSINESS
Changes affecting competition in retail markets also are occurring. Large
commercial and industrial customers are reducing their energy costs through
self-generation or cogeneration, the use of alternate fuel sources such as
natural gas, and special contracts negotiated on the basis of actual or
potential location or relocation of facilities and operations. While some
states, such as Maryland, have decided that retail wheeling is not in the public
interest at this time (refer to "Maryland Competition and Regulatory Policies
Inquiry" on page I-15), other state governments are considering various forms of
retail wheeling, which would permit other utilities and non-utility generators
to compete to serve retail customers currently served by a particular utility.
In 1995, Delaware enacted legislation that authorizes the Delaware Public
Service Commission (DPSC) to deregulate the utility industry when a competitive
market exists and implement alternatives to traditional rate base, rate of
return regulation (refer to "Delaware Task Force on Regulation" on page I-14).
At the federal level, legislation was recently introduced in the U.S. Senate to
require all states to provide for retail wheeling by the year 2010.
The Company is well positioned for competition in the retail markets, partly
due to its relatively low prices within the region. The Company's prices for
large retail customers are among the lowest in the area and are competitive with
alternative sources of energy such as self-generation. The Company's average
price for commercial customers in 1994 was 7.01 cents per kilowatt-hour (kWh)
compared to a regional average of 8.67 cents per kWh. The Company's average
price for industrial customers in 1994 was 4.48 cents per kWh compared to a
regional average of 6.65 cents per kWh. These regional averages are based on
1994 data for 27 utilities within a 300-mile radius of the Company.
The Company believes that the benefits of a competitive market can best be
realized when addressed together by the Company, the Commissions and customers.
In February 1996, the Company presented to the DPSC and the Maryland Public
Service Commission (MPSC) a proposal to enter into a collaborative process to
develop the transition from a regulated to a competitive energy market. For more
information concerning this presentation and the Company's actions and plans to
manage its retail business in a competitive environment, refer to the "Strategic
Plans For Competition" section of the MD&A of the Company's 1995 Annual Report
to Stockholders filed as Exhibit 13.
GAS BUSINESS
Deregulation and restructuring of the production and interstate pipeline
segments of the gas industry began in 1985 with the Wellhead Decontrol Act and
concluded with FERC Order No. 636 in 1993. As a result of FERC's deregulation of
the gas industry, the Company primarily purchases gas directly from producers
and transports the gas through various pipelines.
I-2
<PAGE>
End-use customers, including the Company's retail gas customers, may also
purchase gas directly from producers and marketers, arrange for their own
transportation on pipelines, and transport gas to their facilities using the
Company's gas transmission and distribution facilities. End-use transportation
customers pay the Company a fee according to retail transportation tariffs. The
Company has entered into a joint marketing program with Columbia Energy Services
Corporation, an affiliate of the Columbia Gas System, to meet this competition
by directly marketing rebundled gas supply principally to the Company's end-use
customers.
In February 1996, the DPSC approved the Company's application to provide
additional local deregulation for end-use customers (refer to "Natural Gas
Restructuring Filing" on page I-15). Deregulation of the gas industry has
allowed the Company to achieve additional revenues by making off-system sales to
end-use customers outside the traditional service territory.
Finally, the Company is participating as a member of the East Coast Natural
Gas Cooperative with seven other regional distribution companies. These
companies are working jointly to ensure reliability, purchase supplies at the
lowest reasonable cost, provide for joint planning, increase operational
efficiencies, and consider market opportunities.
ELECTRIC OPERATIONS
INSTALLED CAPACITY
The net installed summer electric generating capacity available to the
Company to serve its peak load as of December 31, 1995, is presented below. The
Company's purchase of 205 megawatts (MW) of capacity from PECO, related to the
COPCO acquisition, was excluded from the Company's installed capacity until
February 1, 1996, as agreed with PECO and in compliance with the accounting
provisions of the Pennsylvania-New Jersey-Maryland Interconnection Association
(PJM Interconnection). For a discussion of the Company's energy supply plan,
refer to "Energy Supply Plan" on page I-4.
<TABLE>
<CAPTION>
% OF
INSTALLED SUMMER CAPACITY MEGAWATTS TOTAL
- ------------------------- --------- -----
<S> <C> <C>
Coal-Fired........................................................................... 1,120 39
Oil-Fired............................................................................ 586 20
Combustion Turbines/Combined Cycle................................................... 511 18
Nuclear.............................................................................. 328 11
Peaking Units........................................................................ 183 6
Purchased Capacity................................................................... 48 2
Customer-owned Capacity.............................................................. 57 2
----- ---
Subtotal........................................................................... 2,833 98
Purchased PJM Interconnection Capacity Credits....................................... 50 2
----- ---
Total.............................................................................. 2,883 100
===== ===
</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-23 for a listing of net
installed generating capacity by station.
POWER POOL
As a member of the PJM Interconnection, 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 $12.5 million during 1995.
I-3
<PAGE>
The PJM Interconnection's installed capacity as of December 31, 1995 was
56,098 MW. The PJM Interconnection peak demand during 1995 was 48,524 MW on
August 2nd, which resulted in a summer reserve margin of 15.3% (based on
installed capacity of 55,962 MW on that date). This peak replaces the previous
all-time peak demand of 46,429 MW which was set on July 8, 1993.
In November 1995, seven PJM Interconnection member companies, including the
Company, provided a detailed plan to the FERC to modify or replace the PJM
Interconnection Agreement and other existing transmission agreements among the
current PJM Interconnection members. The detailed plan is intended, among other
things, to provide transmission tariffs which comply with regulations expected
to result from the NOPR on open access transmission issued by FERC in March 1995
(refer to "Electric Resale Business" on page I-1). The sponsoring companies
intend to make a comprehensive filing with FERC by the end of May 1996 with
possible implementation of the basic elements of the restructured PJM
Interconnection pool operations by year-end 1996. The plan includes the
following key elements:
- Pool-wide transmission tariffs providing comparable, open-access service
for all wholesale transactions throughout the PJM Interconnection;
- A regional pool energy market using price-based dispatch that is open to
all available wholesale buyers and sellers of power;
- Establishment of an Independent System Operator (ISO) to provide daily
management and administration of pool operations, the energy market, and
the regional transmission network; and
- Development of an enhanced pool-wide planning function consistent with
Mid-Atlantic Area Coordination principles, criteria and procedures, which
provide 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 1995 was 2,602 MW on August 4th, which surpassed
the Company's previous peak of 2,551 MW on July 8, 1994. By mutual agreement
with PECO and in compliance with PJM Interconnection accounting provisions, the
1995 peak does not include 172 MW of COPCO load, for which PECO continued to be
responsible until February 1, 1996. Because adequate generation was available,
these peaks do not reflect full implementation of the Company's demand-side
programs, including the curtailment of large interruptible customers. The
Company's PJM Interconnection capacity obligation, including a reserve margin,
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 2,364 MW
in 1995. Based upon this estimated peak and the Company's installed generating
capacity of 2,829 MW at the time of the peak, the Company's reserve margin would
have been 19.7%. The Company's reserve obligation varies from year to year, but
typically is around 18%.
ENERGY SUPPLY PLAN
The objective of the Company's energy supply plan is to provide an adequate,
reliable, and competitively priced supply of electricity to customers with a
minimal adverse effect on the environment. This plan, which is updated annually,
is based on forecasts of demand for electricity in the service territory and
reserve requirements of the PJM Interconnection. The plan emphasizes balance and
flexibility, and may be accelerated, slowed, or altered in response to changing
energy demands, fluctuating fuel prices, and emerging technologies. The plan
considers customer-oriented load management and conservation programs
("demand-side" alternatives) along with long- and short-term power contracts,
and new or renovated power plants ("supply-side" alternatives). The plan
currently matches customers' energy requirements and does not require large
investments for new resources. For further discussion of the energy supply plan,
refer to the "Energy Supply" section of the MD&A of the Company's 1995 Annual
Report to Stockholders filed as Exhibit 13.
I-4
<PAGE>
As of the end of 1995, the Company had enrolled in its demand-side programs
about 88,600 residential customers and about 1,600 commercial and industrial
customers, who in aggregate provide the Company with the ability to reduce its
peak by approximately 243 MW. On October 3, 1995, the Company filed to close its
existing demand-side programs to new participants in Delaware and Maryland,
while it reexamined the design and efficacy of these programs and considered the
possible implementation of other cost-effective and otherwise appropriate
programs. The Company took this step because analysis indicated that its current
and other potential demand-side programs are not appropriate, cost-effective
resources for meeting the incremental needs of the Company's customers.
As part of the supply-side portion of the energy supply plan, the Company is
purchasing 48 MW of peaking capacity through May 2018 from the Delaware City
Power Plant owned by Star Enterprise (Star). In conjunction with its acquisition
of COPCO, the Company is purchasing base-load capacity from PECO that will
increase from 205 MW in 1996 to 279 MW when the contract expires in 2006. In
addition, short-term purchases are being considered to meet continuing PJM
Interconnection capacity obligations from 1997 to 2000. As further discussed
under "Life Extensions" on page I-9, the Company also has a power plant
life-extension program to extend the operating lives of certain generating
units.
The table below summarizes the peak load and capacity forecast for the
current and next five PJM Interconnection planning periods, beginning annually
on June 1. The Company periodically reviews and updates its forecast to reflect
changes in peak load and capacity estimates.
<TABLE>
<CAPTION>
PEAK LOAD (MW) CAPACITY (MW)
PJM --------------------------- -----------------------------
PLANNING GROSS NET TOTAL
YEAR SUMMER TOTAL SUMMER TOTAL OWNED TOTAL RESERVE
BEGINNING COMPANY DEMAND- COMPANY PURCHASED POWER INSTALLED MARGIN
JUNE 1 PEAK SIDE PEAK POWER PLANTS CAPACITY (%)
- ----------------------------------- ------- ------- ------- --------- ----- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1995............................... 2607 243 2364 48 2781 2829 19.7
1996............................... 2849 243 2606 253 2786 3039 16.6
1997............................... 2877 243 2634 335 2786 3121 18.5
1998............................... 2867 243 2624 310 2786 3096 18.0
1999............................... 2926 243 2683 367 2786 3153 17.5
2000............................... 2985 243 2742 423 2786 3209 17.0
</TABLE>
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, and Public Service Electric
and Gas Company (PSE&G). The Peach Bottom units are operated by PECO and have a
combined summer capacity of 2,186 MW, of which the Company is entitled to 164 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 that continuous demonstrations be made 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,
refer to Note 7 to the Consolidated Financial Statements of the Company's 1995
Annual Report to Stockholders filed as Exhibit 13.
I-5
<PAGE>
As by-products of their operations, nuclear generating units, including the
Peach Bottom and Salem units, produce low level radioactive waste (LLRW). Such
waste includes paper, plastics, protective clothing, water purification
materials and other materials which must be disposed of properly. Prior to July
1994, PECO and PSE&G disposed of such materials at a federally licensed
permanent disposal facility in Barnwell, South Carolina. At that time, in
accordance with the Low Level Radioactive Waste Policy Act, as amended, the
facility exercised its authority to stop accepting waste from New Jersey and
Pennsylvania, which states are not members of the regional compact under which
the facility is operated. Peach Bottom and Salem stored the waste temporarily
on-site until the South Carolina site allowed the units to resume shipments in
July 1995. The on-site facilities at PECO and PSE&G have capacity for at least
five years of temporary storage. PECO has informed the Company that Pennsylvania
is pursuing its own LLRW site development via state-selected candidate sites,
along with a volunteer plan option. PSE&G also has informed the Company that New
Jersey has introduced a volunteer siting process to establish a LLRW disposal
facility by the year 2000. To date, no volunteers have been identified.
PEACH BOTTOM UNITS
PECO has informed the Company that, on December 5, 1995, the NRC issued its
periodic Systematic Assessment of Licensee Performance (SALP) Report on the
performance of activities at Peach Bottom for the period May 1, 1994 to October
15, 1995. SALP reports rate licensee performance in four assessment areas:
Operations, Maintenance, Engineering and Plant Support. Ratings range from a
high of "1" to a low of "3". Peach Bottom received a rating of "1" in the areas
of Operations, Maintenance, and Plant Support, and "2" in Engineering. PECO has
informed the Company that the NRC observed excellent performance at Peach Bottom
during the assessment period. Station management oversight, effective use of
performance enhancement at all levels of the organization and other measures in
identifying and evaluating issues contributed to the strong performance. The NRC
noted performance improvements in all assessment areas, particularly in
Maintenance and Plant Support. Although the NRC noted that excellent performance
often was displayed in the Engineering area, errors in modification work, in
addition to some other lapses, indicated inconsistent engineering performance.
PECO has informed the Company that it is taking actions to further improve Peach
Bottom performance.
PECO has informed the Company that, by a letter dated October 18, 1994, the
NRC approved PECO's request to rerate the authorized maximum reactor-core power
levels of each Peach Bottom unit by 5% to 1,093 MW. The amendment of the Peach
Bottom Unit 2 facility operating license was effective upon the date of the NRC
approval letter and the associated hardware changes were completed during the
Peach Bottom Unit 2 refueling outage in the fall of 1994. The amendment for
Peach Bottom Unit 3 was issued by the NRC on July 18, 1995 and the associated
hardware changes were implemented during the Peach Bottom Unit 3 refueling
outage in the fall of 1995.
On August 2, 1995, the NRC held an enforcement conference regarding three
alleged violations identified by the NRC at Peach Bottom. In a letter dated
August 17, 1995, the NRC stated that the inadequate design control and testing
which led to the degradation of emergency diesel generator capabilities
constituted a Level III violation; however, because PECO identified the issues,
conducted a detailed root-cause evaluation and took appropriate corrective
actions, no civil penalty was proposed.
PECO has informed the Company that, in October 1990, General Electric
Company (GE) reported that crack indications were discovered near the seam welds
of the core shroud assembly in a GE Boiling Water Reactor (BWR). As a result, GE
issued a letter requesting that the owners of GE BWR plants take interim
corrective actions, including a review of fabrication records and visual
examinations of accessible areas of the core shroud seam welds. Peach Bottom
Unit 3 was initially examined during its refueling outage in the fall of 1993.
Although crack indications were identified at two locations, PECO presented its
finding to the NRC and provided justification for continued operation of Peach
Bottom Unit 3 for a two-year cycle. Peach Bottom Unit 3 was re-examined during
its last
I-6
<PAGE>
refueling outage in the fall of 1995 and the extent of cracking identified was
determined to be within industry-established guidelines. In a letter to the NRC
dated November 3, 1995, PECO concluded that there is a substantial margin for
each core shroud weld to allow for continued operation of Peach Bottom Unit 3.
Peach Bottom Unit 2 was examined in October 1994 during its last refueling
outage and the inspection revealed a minimal number of flaws. In a letter dated
November 7, 1994, PECO submitted its findings to the NRC and provided
justification for continued operation of Peach Bottom Unit 2. PECO is
participating in a GE BWR Owners Group to develop long-term corrective actions.
SALEM UNITS
Due to operational problems and maintenance concerns, Salem Units 1 and 2
were removed from operation by PSE&G on May 16, 1995 and June 7, 1995,
respectively. PSE&G has informed the Company that since that time, PSE&G has
been engaged in an assessment of each unit to identify and complete the work
necessary to achieve safe, sustained, reliable and economic operation. PSE&G has
stated that it will keep each unit off line until it is satisfied that the unit
is ready to return to service and to operate reliably over the long term and the
NRC has agreed that the unit is sufficiently prepared to restart. On June 9,
1995, the NRC issued a Confirmatory Action Letter documenting these commitments
of PSE&G.
PSE&G has informed the Company that, on December 11, 1995, PSE&G presented
its restart plan for both units to the NRC at a public meeting. On February 13,
1996, the NRC staff issued a letter to PSE&G indicating that it had concluded
that PSE&G's overall restart plan, if implemented effectively, should adequately
address the numerous Salem issues to support a safe plant restart, and
describing further actions the NRC will undertake to confirm that PSE&G's
actions have resulted in the necessary performance improvements to support safe
plant restart.
PSE&G also has stated that, as a part of PSE&G's review, an examination is
being performed on the steam generators, which are large heat exchangers used to
produce steam to drive the turbines. Within the industry, certain pressurized
water nuclear reactors (PWR) other than Salem have experienced cracking in a
sufficient number of the steam generator tubes to require various modifications
to these tubes and replacement of the steam generators in some cases. Until the
current outage, regular periodic inspections of the steam generators for each
Salem unit have resulted in repairs of a small number of tubes well within NRC
limits. As a result of the experience of other utilities with cracking in steam
generator tubes, in April 1995 the NRC issued a generic letter to all utilities
with PWRs to conduct steam generator examinations with more sensitive inspection
devices capable of detecting evidence of degradation. Subsequently, PSE&G
conducted steam generator inspections of the Salem units using the latest
technology available, including a new, more sensitive, eddy current testing
device.
In addition, PSE&G has informed the Company that, with respect to Salem Unit
1, the most recent inspection of the steam generators is not complete, but
partial results from eddy current inspections in February 1996 using this new
technology show indications of degradation in a significant number of tubes. The
inspections are continuing and PSE&G has decided to remove several tubes for
laboratory examination to confirm the results of the inspections. Removal of the
tubes should be completed in March and preliminary results of the state of the
Salem Unit 1 tubes from the subsequent laboratory examinations should be known
in April. However, based on the results of inspections to date, PSE&G has
concluded that the Salem Unit 1 outage, which was expected to be completed in
the second quarter of 1996, will be required to be extended for a substantial
additional period to evaluate the state of the steam generators and to
subsequently determine an appropriate course of action. Degradation of steam
generators in PWRs has become an increasing concern for the nuclear industry.
Nationally and internationally, utilities have undertaken actions to repair or
replace steam generators. In the extreme, degradation of steam generators has
contributed to the retirement of several American nuclear power reactors. After
the Salem Unit 1 tubes are fully examined, PSE&G will be able to evaluate its
course of action in light of NRC and other industry requirements.
I-7
<PAGE>
According to PSE&G, the examination of the Salem Unit 2 steam generators was
completed in January 1996 using the same testing device used in Salem Unit 1.
The results of the Salem Unit 2 inspection are being reviewed again to confirm
their results in light of the experience with Salem Unit 1. Although this review
has not yet been completed, results to date appear to confirm that the condition
of the Salem Unit 2 steam generators is within current repair limits at the
present time. PSE&G also will remove tubes from the Salem Unit 2 steam
generators for laboratory analysis to further confirm the results of this
testing.
Also, PSE&G had planned to return Salem Unit 1 to service in the second
quarter of 1996 and Salem Unit 2 in the third quarter of 1996. As a result of
the extent of the recently discovered degradation in the Salem Unit 1 steam
generators, PSE&G is focusing its efforts on the return of Salem Unit 2 to
service in the third quarter. The conduct of the additional steam generator
inspections and testing on Salem Unit 2 is not expected to adversely affect the
timing of its restart. However, the timing of the restart is subject to
completion of the requirements of the restart plan to the satisfaction of PSE&G
and the NRC as well as to the normal uncertainties associated with such a
substantial review and improvement of the systems of a large nuclear unit, so
that no assurance can be given that the projected return date will be met.
According to PSE&G, on January 3, 1995, the NRC provided PSE&G with its
latest SALP report on Salem for the period between June 20, 1993 and November 5,
1994. Salem received ratings of "3", the lowest acceptable rating, in the
Operations and Maintenance areas, "2" in Engineering, and "1" in Plant Support.
The NRC noted an overall decline in performance and evidenced particular concern
with plant and operator challenges caused by repetitive equipment problems and
personnel errors. The NRC also noted that although PSE&G has initiated several
comprehensive actions within the past year to improve plant performance, and
some recent incremental gains have been made, these efforts have yet to
noticeably change overall performance at Salem.
On March 21, 1995, representatives of the NRC Staff met with the Boards of
Directors of Public Service Enterprise Group, Inc. and PSE&G to reiterate the
previously expressed concerns with regard to Salem's operations. The NRC staff
acknowledged that PSE&G had made efforts to improve Salem's operations,
including making senior management changes, but indicated that demonstrated
sustained results have not yet been achieved.
PSE&G also has informed the Company that an NRC enforcement conference was
held on July 28, 1995, related to certain violations of NRC requirements at
Salem not related to the present outage. The violations included valves that
were incorrectly positioned following a plant modification in May 1993,
non-conservatisms in setpoints for a pressurizer overpressure protection system
and several examples of inadequate root cause determination of events, leading
to insufficient corrective actions. On October 16, 1995, the NRC imposed
cumulative civil penalties related to these violations of $600,000, of which the
Company's share is 7.41%. PSE&G did not contest the penalties.
On October 5, 1995, plant operators at Salem Unit 1 declared an alert
because the overhead annunciator panels located in the control room stopped
functioning. The panels were declared fully operable after testing later that
day, and the alert was terminated. On November 13, 1995, the NRC conducted an
exit meeting to review NRC Special Inspection Team (SIT) findings regarding the
loss of the overhead annunciator panels. The SIT noted two potential violations
and two unresolved items. The items were all associated with Emergency
Preparedness.
PSE&G has informed the Company that PSE&G's own assessments, as well as
those by the NRC and the Institute of Nuclear Power Operations, indicate that
additional efforts are required to further improve operating performance, as
reflected in the restart plans referred to previously. PSE&G has informed the
Company that PSE&G is committed to taking the necessary actions to address
Salem's performance needs. It is anticipated that the NRC will continue to
maintain a close watch on Salem's restart activities and subsequent operational
performance. No assurance can be given as to what, if any, further or additional
actions may be taken or required by the NRC to improve Salem's performance.
I-8
<PAGE>
The Company's operation and maintenance costs and replacement power costs
related to the current outage are discussed in the "Salem Outage" section of the
MD&A and Note 16 to the Consolidated Financial Statements of the Company's 1995
Annual Report to Stockholders filed as Exhibit 13.
On February 27, 1996, the co-owners of Salem, including the Company, filed a
complaint in the United States District Court for New Jersey against
Westinghouse Electric Corporation (Westinghouse), the designer and manufacturer
of the Salem steam generators. The complaint, which seeks to recover from
Westinghouse the costs associated with replacing Salem's steam generators,
alleges violations of federal and New Jersey Racketeer Influenced and Corrupt
Organizations Acts, fraud, negligent misrepresentation and breach of contract.
The Salem co-owners contend that the recently discovered degradation of the
steam generators will prevent the steam generators from operating for a design
life of 40 years. The lawsuit asserts that the Salem steam generators ultimately
will require replacement and these costs should be borne by Westinghouse and not
the customers and shareholders of the Salem co-owners. The Company cannot
predict the outcome of this lawsuit.
On March 5, 1996, the Company and PECO filed a complaint in the United
States District Court for the Eastern District of Pennsylvania against Public
Service Enterprise Group, Inc. and PSE&G, the operator of Salem. The lawsuit
alleges that the defendants failed to respond adequately to numerous citations,
warnings, notices of violations and fines by the NRC as well as repeated
warnings from the Institute of Nuclear Power Operations about performance,
safety, and management problems at Salem. Further, the defendants failed to take
appropriate corrective action. The suit contends that as a result of these
actions and omissions, the defendants were forced to shut down both Salem units
in 1995. The suit asks for compensatory damages for breach of contract and for
the defendants' "gross negligence, willful, wanton and reckless misconduct and
misfeasance in performance of the Owners' Agreement" and punitive damages, in
amounts to be determined. The Company cannot predict the outcome of this
lawsuit.
See page I-18 for a discussion on the status of the operating permit at
Salem.
LIFE EXTENSIONS
The Company is conducting a life extension program on its older,
wholly-owned 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 have been completed to date or
will be implemented during scheduled maintenance outages. Edge Moor Unit 5 and
Vienna Unit 8 will undergo surveys beginning in 1996 and 1997, respectively.
Construction expenditures on these projects for the five-year period 1996-2000
are expected to total approximately $31 million, excluding allowance for funds
used during construction (AFUDC).
PURCHASED POWER
The Company makes short-term energy purchases from several sources in an
effort to replace higher-cost generation. During 1995, purchases were made from
Allegheny Power System, PECO, and several power marketers. The Company's
estimated fuel savings from these transactions amounted to $3.4 million during
1995.
The Company also purchases 48 MW of long-term capacity from Star Enterprise
and has entered into a power purchase agreement with PECO associated with the
Company's acquisition of COPCO as discussed under "Energy Supply Plan" on page
I-4.
I-9
<PAGE>
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. Coal is the Company's predominant fuel. Corresponding
values for purchased power and for net interchange (purchases less sales) as a
member of the PJM Interconnection are also listed.
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------- ------------------------------- -------------------------------
GENERATION 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.............. 5,086 18 40 5,499 18 42 6,028 18 47
Oil-fired............... 1,191 28 9 1,998 27 15 2,343 24 18
Nuclear................. 1,567 8 12 2,052 8 16 1,883 7 14
Natural Gas............. 2,953 20 23 2,033 19 15 1,010 23 8
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Company
Generation........... 10,797 18 84 11,582 18 88 11,264 18 87
PURCHASES/ INTERCHANGE
- ------------------------
Purchases............... 3,156 21 24 2,873 23 22 3,200 22 25
Net Interchange......... (1,040) (29) (8) (1,328) (32) (10) (1,568) (30) (12)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Output for
Load................. 12,913 18 100 13,127 17 100 12,896 18 100
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
</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. To facilitate the
purchase of adequate amounts of fuel at reasonable prices, the Company contracts
with various suppliers of coal, oil, and natural gas on both a long- and
short-term basis. The Company's long-term coal contracts generally contain
provisions for periodic and limited price adjustments which are based on current
market prices. Oil and natural gas contracts generally are of shorter term with
prices determined by market-based indices.
COAL
Edge Moor Units 3 and 4, and the Indian River, Keystone and Conemaugh
generating stations are coal-fired. During 1995, 5% of the Company's coal supply
was purchased under short-term contracts (less than three years), 77% under
long-term contracts (up to ten years), and the balance on the spot market. As of
December 31, 1995, a maximum of 79% of the Company's coal requirements were
under supply contracts. 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 currently is
being supplied under a two-year contract which expires in 1996. Any amount over
75% of requirements may be purchased in the spot market. The Company expects to
negotiate a new contract in 1996 with similar terms. Natural gas is utilized
when economically feasible. The fuel supply contract for the Vienna Generating
Station, which expires in 1997, provides from 90% to 100% of that station's
requirements. Any amount over 90% of requirements may be purchased in the spot
market.
GAS
Natural gas, which is the primary fuel for the three combustion turbines
(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-12. Additional natural gas is purchased on a firm or interruptible basis from
one of the Company's pipeline suppliers. The secondary fuel for the Hay Road CTs
is kerosene, which is purchased on the spot market.
I-10
<PAGE>
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 gas, enrichment of that gas, conversion of
the enriched gas to fuel pellets, fabrication of fuel assemblies from the
pellets, 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
that will satisfy the fuel requirements of Peach Bottom through 2002. In
February 1995, two companies that supply uranium concentrates to PECO filed
petitions for bankruptcy under Chapter 11 of the Bankruptcy Code. The two
companies supply approximately half of PECO's 1995 and 1996 requirements for
uranium concentrates. In addition, one of the companies is under contract to
supply approximately 25% of PECO's uranium concentrate requirements for the
period 1997 to 2002. PECO has made alternative arrangements with other suppliers
to satisfy its short-term requirements for uranium concentrates. PECO also is
finalizing arrangements with another supplier to satisfy its longer-term needs.
PECO does not anticipate any difficulties in obtaining its requirements for
uranium concentrates. PECO's contracts for uranium concentrates are allocated to
Peach Bottom on an as-needed basis. PSE&G also 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. PSE&G does not
anticipate any difficulties in obtaining its requirements for uranium
concentrates. 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......................................................... (1) (2) 1999
Peach Bottom Unit 3......................................................... (1) (2) 1998
Salem Unit 1................................................................ 2000 (3) 2004
Salem Unit 2................................................................ 2000 (3) 2005
</TABLE>
- ------------------------
(1) PECO has commitments for 100% of its conversion services for Peach Bottom
through 1997. Approximately 40% of the conversion services requirements are
covered through 2001. PECO does not anticipate any difficulties in obtaining
necessary conversion services for Peach Bottom.
(2) PECO has commitments for enrichment services for Peach Bottom under contract
with the United States Enrichment Corporation. The commitments represent
100% of the enrichment requirements through 1998 and 70% through 1999. PECO
does not anticipate any difficulties in obtaining necessary enrichment
services for Peach Bottom.
(3) 100% coverage through 1998; approximately 50% coverage through 2002; and
approximately 30% coverage through 2004. PSE&G does not anticipate any
difficulties in obtaining necessary enrichment services for Salem.
In conformity with the Nuclear Waste Policy Act of 1982 (NWPA), PECO and
PSE&G have 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 one-tenth of one cent per kWh of nuclear generation net of station
use 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 DOE was to begin accepting spent fuel for
permanent off-site storage no later than 1998. However, the DOE has stated that
it would not be able to open a permanent, high-level nuclear waste storage
facility until 2015, at the earliest.
I-11
<PAGE>
In June 1994, a number of utilities and state agencies, including the PUC,
filed a lawsuit against the DOE seeking a determination of the DOE's legal
obligation to accept fuel by 1998. In April 1995, the DOE published its final
interpretation on the nuclear waste acceptance issues and stated that it had no
legal obligation to begin waste acceptance in 1998, in the absence of an
operational repository or other storage facility. PSE&G has informed the Company
that, along with 24 other utilities and a combination of 48 states, state
regulatory agencies and municipal power agencies, PSE&G has filed a lawsuit in
the United States District Court of Appeals for the District of Columbia Circuit
against the DOE to protect its contractual rights. The Company is not a party to
either of the above lawsuits. The Company cannot predict when the DOE-sponsored
temporary or permanent storage sites will become available.
In 1990, the NRC determined that spent nuclear fuel generated in any reactor
can be stored safely and without significant environmental impact in reactor
facility storage pools or in independent spent nuclear fuel storage
installations located at or away from reactor sites for at least 30 years beyond
the licensed life for operation (which may include the term of a revised or
renewed license). PECO has advised the Company that Peach Bottom has adequate
on-site temporary spent-fuel storage capability until 2000 for Peach Bottom Unit
2 and 2001 for Peach Bottom Unit 3. Options for expansion of storage capacity
beyond the pertinent dates are being investigated by PECO. PSE&G also has
advised the Company that, as a result of replacing the existing high-density
racks in the spent-fuel storage pools of Salem Units 1 and 2 with
maximum-density racks, the availability of adequate spent fuel storage capacity
is conservatively estimated through 2008 for Salem Unit 1 and 2012 for Salem
Unit 2.
The Energy Act provided for creation of a Decontamination & Decommissioning
(D&D) Fund to pay for the future clean-up of DOE gaseous diffusion enrichment
facilities. Domestic utilities and the federal government are required to make
payments to the D&D fund until 2008 or $2.25 billion, adjusted annually for
inflation, is collected. The liability for the Company's share of the D&D fund
was $6.8 million as of December 31, 1995. The Company is recovering this cost
through fuel adjustment clause revenues which are discussed on page I-13.
GAS OPERATIONS
During 1995, the average production cost of all gas sold was $2.95 per
thousand cubic feet (Mcf), compared with $3.06 and $3.22 per Mcf in 1994 and
1993, respectively. Gas capacity requirements are purchased primarily under
contracts with three pipeline suppliers. The Company also purchases gas supply
from marketers and producers, primarily under one- to five-year agreements. The
Company's peak shaving plant for liquefaction, storage, and re-gasification of
natural gas provides supplemental gas.
As shown in the table below, the Company's maximum 24-hour system
capability, including natural gas purchases, storage deliveries, and the maximum
planned sendout of its peak shaving plant, is 158,669 Mcf.
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DAILY
CONTRACTS DATES MCF
--------------- ------------ ---------
<S> <C> <C> <C>
Supply..................................................................... 4 1996-2004 31,442
Transportation............................................................. 3 2004 59,795
Storage.................................................................... 4 1996-2004 42,432
Local Peak Shaving......................................................... -- -- 25,000
---------
Total.................................................................... 158,669
---------
---------
</TABLE>
The Company's peak shaving plant has an emergency peak shaving capability of
45,000 Mcf per day, which increases the maximum daily sendout capacity to
178,669 Mcf. The Company experienced a new all-time peak daily firm sendout of
158,512 Mcf on January 19, 1994, during extreme weather conditions. The maximum
daily firm sendout experienced to date during the 1995/96 winter was 144,125
Mcf.
I-12
<PAGE>
SUBSIDIARIES
Delcap is a wholly-owned subsidiary of the Company that is engaged in
landfill and waste-hauling operations, the ownership, operation and maintenance
of energy-related projects, real estate sales and development, and investments
in leveraged equipment leases. A Delcap subsidiary operates and maintains Star's
Delaware City Power Plant from which the Company purchases capacity and energy.
As of December 31, 1995, Delcap's stockholder's equity was $36.8 million.
Delmarva Services Company, a wholly-owned subsidiary of the Company, leases
an office building to the Company. As of December 31, 1995, its stockholder's
equity was $6.0 million.
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. During
1995, Delmarva Energy and Delmarva Industries made dividend payments of $600,000
and $400,000, respectively, to the Company. As of December 31, 1995, their
combined stockholder's equity was $1.1 million.
For a further discussion of the Company's subsidiaries refer to
"Environmental Matters -- Subsidiaries" on page I-20, as well as the "Nonutility
Subsidiaries" section of the MD&A and Notes 1 and 18 to the Consolidated
Financial Statements of the 1995 Annual Report to Stockholders filed as Exhibit
13.
REGULATORY AND RATE MATTERS
The Company is subject to regulation with respect to its retail electric
sales by the DPSC, the MPSC, and the Virginia State Corporation Commission
(VSCC), each of which have broad jurisdiction 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.
The FERC exercises jurisdiction with respect to the Company's accounting systems
and policies, the transmission of electricity, the wholesale sale of
electricity, and interchange and other purchases and sales of electricity
involving other utilities. The FERC also regulates the price and other terms of
transportation of natural gas purchased by the Company. The percentage of
combined electric and gas utility operating revenues regulated by each
Commission for the year ended December 31, 1995 was as follows: DPSC 64%; MPSC
27%; VSCC 3%; and FERC 6%.
BASE RATE PROCEEDINGS
For information concerning the Company's base rate proceedings, refer to
Note 2 to the Consolidated Financial Statements in the 1995 Annual Report to
Stockholders, which is filed as Exhibit 13.
FUEL ADJUSTMENT CLAUSES
The Company's tariffs generally 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 generally are subject to base rate recovery. The present
status or results of significant fuel rate issues are discussed below. As of
December 31, 1995, the Company had accrued fuel disallowance reserves that
adequately provide for any disallowances of fuel costs and penalties related to
the issues discussed below.
Both Delaware and Maryland have programs that assess the overall performance
of the Company's 15 major generating units. Under the DPSC's Power Plant
Performance Program (PPPP), the
I-13
<PAGE>
Company can receive financial rewards or penalties, which will not exceed an
estimated cap of $1.6 million in 1996. The 1994 and projected 1995 PPPP results
are not material to the Company's financial position or results of operations.
If the Company does not meet an overall system performance standard set by
Maryland's Generating Unit Performance Program, the MPSC can disallow certain
fuel costs of units that operated below their individual performance standards.
The 1994 results indicated that the overall system performance standard was met.
The 1995 standards are in the process of being set.
In September 1995, the DPSC issued an order concerning the Company's 1995
retail fuel adjustment filing and disallowed approximately $800,000 of net
replacement power costs associated with a Salem Unit 1 outage that occurred from
April 7, 1994 to June 4, 1994. The order excluded the outage in determining
performance under the PPPP.
In December 1995, the DPSC issued an order concerning the Company's 1996
retail fuel adjustment filing and permitted the Company to retain the fuel
adjustments in effect at that time, pending the Company's supplemental filing
sometime in 1996, which is expected to include a request for recovery of
replacement power costs associated with the current Salem outages. For
additional discussion regarding the current Salem outages, refer to "Salem
Units" on page I-7 and the "Salem Outage" section of the MD&A and Note 16 to the
Consolidated Financial Statements of the Company's 1995 Annual Report to
Stockholders filed as Exhibit 13.
In May 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. In September 1995, the FERC dismissed all
issues except for the limited issue of whether the Company should have pursued
legal remedies against PSE&G for the outage that occurred at Salem Unit 2 from
November 9, 1991 to May 10, 1992. In January 1996, the FERC administrative law
judge issued an initial decision dismissing the remaining complaint. The
municipal customers filed an application for rehearing, which was denied by the
FERC on February 28, 1996, and the Docket was terminated. The Municipals have 60
days to file an appeal.
OTHER REGULATORY MATTERS
ELECTRIC COLLABORATIVE PROPOSAL
For a discussion of the electric collaborative proposal presented to the
DPSC and the MPSC, refer to the "Strategic Plans for Competition" section of the
MD&A of the Company's 1995 Annual Report to Stockholders filed as Exhibit 13.
DELAWARE TASK FORCE ON REGULATION
In 1993, the Governor of Delaware convened the Public Utility Regulatory
Task Force, and on June 12, 1995, the Governor signed legislation implementing
the following key recommendations of the task force.
- The DPSC is authorized to (a) deregulate utility businesses when a
competitive market exists and (b) implement alternative forms of
regulation which depart from traditional rate base, rate of return
regulation;
- The DPSC can authorize special rates for economic development purposes,
such as attracting new customers and preventing the loss of existing
customers;
- The process through which the DPSC approves a public utility's proposed
issuances of debt and equity securities has been streamlined;
- The DPSC is authorized to conduct rate proceedings in which the number or
type of issues are limited; and
- The DPSC is encouraged to resolve issues through the use of settlements.
I-14
<PAGE>
SPECIAL CONTRACT RATE TARIFFS
With respect to its electric business, the Company filed an Economic
Development Rate (EDR) Tariff and a Negotiated Contract Rate (NCR) Tariff with
the DPSC in August 1995 and with the MPSC in November 1995. New and existing
business operations that make a substantial capital investment and/or create new
jobs would be eligible for the EDR, which reflects the guidelines of the
Delaware regulatory reform legislation described previously. These tariffs also
would allow the Company to compete nationally. The proposed EDR provides a
discount which is set at a level such that revenues are sufficient to recover
all variable costs and contribute towards fixed costs. The NCR addresses special
business needs and opportunities which cannot otherwise be accommodated by the
Company's standard tariffs or EDR. The Company proposed that the stockholders
and ratepayers share 20% and 80%, respectively, in Delaware and 30% and 70%,
respectively, in Maryland of the value of the EDR discounts. In both states,
stockholders and ratepayers would share equally the amount of the NCR discounts.
Various modifications, dealing primarily with the discount sharing, are being
considered in settlement discussions with parties in Delaware. Maryland's rates
were approved in March 1996.
MARYLAND COMPETITION AND REGULATORY POLICIES INQUIRY
In August 1995, the MPSC determined that retail wheeling is not in the
public interest at this time. The MPSC decided that resale competition in
combination with competitive bidding for new supply-side and demand-side
resources, special contracts, and utility specific performance-based regulation
can achieve most of the benefits expected from retail wheeling without harming
reliability.
COMPARABLE USE TRANSMISSION TARIFF
In November 1994, the Company submitted a comparable use transmission tariff
as part of its filing with the FERC for approval of the purchase of COPCO. The
tariff became effective, subject to refund, in June 1995. On August 28, 1995,
the Company filed a revised tariff to be consistent with the pro forma tariff
described in the FERC NOPR on open access transmission. In light of the
anticipated filing by the PJM Interconnection of a tariff that would lead to
necessary revisions of the Company's proposed revised tariff, the Company,
intervenors, and FERC staff filed a joint motion in January 1996 for suspension
of the procedural schedule in this docket. On February 1, 1996, the FERC
Administrative Law Judge approved the request for suspension. For a further
discussion of the PJM Interconnection filing, refer to "Power Pool" on page I-3.
NATURAL GAS RESTRUCTURING FILING
In March 1995, the Company filed an application with the DPSC to restructure
its natural gas pricing and service options. In February 1996, the DPSC approved
an uncontested settlement which becomes effective on April 1, 1996. The redesign
of gas rates and modification of the gas cost adjustment mechanism reallocates
revenues among firm customer classes in order to reflect more accurately the
cost of serving these customers. The reallocation increases prices for
residential and low volume commercial customers and decreases prices for most
other commercial and industrial customers.
The settlement unbundles and separately prices several services so that
large and medium volume commercial and industrial customers can elect to use and
pay for only the services that they need. The DPSC also approved new riders and
services, including a Flexibly Priced Gas Sales Service, Quasi-Firm
Transportation Service, Peak Management Rider, and a Negotiated Contract Rate. A
one-year notice is required for firm sales customers switching to transportation
or non-firm service.
The settlement authorizes the Company to provide "nonjurisdictional merchant
sales service," including off-system sales, transportation nomination,
scheduling and coordination services, fuel management services, gas supply or
transportation hedging services, and supply imbalance management services. The
settlement also allows the Company's stockholders to retain 20% of the margin
(revenues net of fuel costs) earned from "nonjurisdictional merchant sales
services," non-firm sales and non-firm transportation services. The remaining
80% will reduce fuel rates charged to firm customers. Currently, 100% of these
margins reduce fuel rates for firm customers.
I-15
<PAGE>
CONSTRUCTION AND FINANCING PROGRAM
Utility construction expenditures for the period 1993-1995, excluding $17
million of AFUDC, and estimated utility construction expenditures for the period
1996-2000, excluding $19 million of AFUDC, are shown in the following table:
<TABLE>
<CAPTION>
CALENDAR YEAR
-------------------------------------
1993 1994 1995
----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Electric Facilities:
Production....................... $ 69,100 $ 54,300 $ 45,900
Transmission..................... 17,300 26,400 11,300
Distribution..................... 40,300 37,800 38,800
Gas Facilities..................... 17,000 19,400 15,600
General Facilities................. 16,300 16,200 24,000
----------- ----------- -----------
$ 160,000 $ 154,100 $ 135,600
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
CALANDER YEAR
-------------------------------------
1998-
1996 1997 2000
----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Electric Facilities:
Production....................... $ 36,000 $ 41,000 $ 123,200
Transmission..................... 16,100 29,000 50,300
Distribution..................... 37,200 45,900 141,900
Gas Facilities..................... 19,400 18,600 58,800
General Facilities................. 23,100 25,000 73,800
----------- ----------- -----------
$ 134,400 $ 159,500 $ 448,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Capital requirements for the period 1996-1997 are estimated to be $324
million, including $25 million for maturity of First Mortgage Bonds in 1997 and
$294 million for utility construction, excluding AFUDC. The Company anticipates
that $283 million will be generated internally during 1996-1997, net of power
purchase commitments. This represents 87% of estimated capital requirements and
96% of estimated utility construction expenditures. During this period no
long-term external financings are presently planned.
Capital requirements for the period 1998-2000 are estimated to be $549
million, including $448 million for utility construction, excluding AFUDC, and
$65 million for the maturity of long-term debt. The Company anticipates that
during the period 1998-2000 $467 million will be generated internally, which
represents 85% of estimated capital requirements and 104% of estimated utility
construction expenditures. A portion of the balance of the capital requirements
for 1998-2000 is expected to be provided by the sale of long-term debt. The
Company anticipates that it will be able to obtain these amounts in the capital
markets on competitive terms.
Since the Company's future construction program, internal generation of
funds, and need for outside capital will be affected by such matters as customer
demand, inflation, competition, and rate regulation, future results may vary
from the foregoing estimates. In addition, the ultimate resolution of the
problems at Salem, as discussed in "Salem Units" on page I-7, may increase
future capital requirements.
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, 1995, these provisions would have permitted the Company to
issue approximately $93 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, 1995
was 6.09. The issuance of First Mortgage Bonds also is limited by the Mortgage
to 60% of 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 such issuance of preferred stock be 1.50 or greater. This ratio
was 2.27 for the twelve months ended December 31, 1995.
I-16
<PAGE>
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 1991-1995 are shown below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges (SEC Method)............................. 3.54 3.49 3.47 3.03 2.58
Ratio of Earnings to Fixed Charges (SEC Method), as Adjusted (1)............ -- 3.74 -- 2.78 --
Ratio of Earnings to Fixed Charges and Preferred Dividends (SEC Method)..... 2.92 2.85 2.88 2.51 2.24
Ratio of Earnings to Fixed Charges and Preferred Dividends (SEC Method), as
Adjusted (1)............................................................... -- 3.05 -- 2.30 --
</TABLE>
- ------------------------
(1) Adjusted ratios reflect the following pre-tax amounts: for 1994, the
exclusion of an early retirement offer charge of $17.5 million; and for
1992, the exclusion of the gain from the Company's share of a settlement
reached in the lawsuit against PECO in connection with the shutdown of Peach
Bottom of $18.5 million.
Under the SEC Method, earnings, including AFUDC, have been computed by
adding income taxes and fixed charges to net income. Fixed charges include gross
interest expense and the estimated interest component of rentals. 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. 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.
For further information on the Company's financing activities, refer to
Notes 10 through 12 to the Consolidated Financial Statements and the "Liquidity
and Capital Resources" section of the MD&A of the 1995 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, oil
pollution control, solid and hazardous 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, capital 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 compliance with environmental regulations,
primarily the Clean Air Act Amendments of 1990 (The Clean Air Act), are
estimated at $53 million (excluding AFUDC) for the years 1996-2000. These
amounts are included in the Company's estimates of utility construction
expenditures under "Construction and Financing Program" on page I-16.
CLEAN AIR ACT
The Clean Air Act requires utilities and other industries to significantly
reduce emissions of air pollutants such as sulfur dioxide (SO2) and oxides of
nitrogen (NOx). Title IV of the Clean Air Act, the acid rain provisions,
established a two-phase program which mandated reductions of SO2 and NOx
emissions from certain utility units by 1995 (Phase I) and required other
utility units to begin reducing SO2 and NOx emissions in the year 2000 (Phase
II). Emission reductions at the jointly-owned Conemaugh Power Plant, the only
units required to comply with Title IV in 1995, have been achieved through
installation and operation of flue gas desulfurization (FGD) systems. The
remainder of the
I-17
<PAGE>
Company's wholly- and jointly-owned fossil fuel fired units are expected to meet
Phase II emission limits through a combination of fuel switching, FGD,
environmental dispatch and SO2 allowance trading.
In addition to complying with Title IV, as major sources of NOx emissions,
Company facilities must comply with Title I of the Clean Air Act, the ozone
nonattainment provisions, which require states to promulgate Reasonably
Available Control Technology (RACT) regulations for existing sources located
within ozone nonattainment areas or within the Northeast Ozone Transport Region
(NOTR). The Company's facilities in Delaware and Maryland are in the NOTR. The
Company has decided to comply with the RACT requirements by undertaking certain
operating changes and installing low NOx burner technology. The Company's
Delaware and Maryland RACT proposals have not received final regulatory
approval. Consequently, costs, in addition to those already budgeted, may be
incurred at these facilities in order to comply with the RACT regulations.
Additional "post-RACT" NOx emission limitations are being discussed by
several entities, including the Northeast Ozone Transport Commission (NOTC). One
such proposal, recognized by a Memorandum of Understanding (MOU) signed by NOTR
member states, would require sources to meet certain emission limitations or to
reduce NOx emissions up to 65% below 1990 levels by 1999. Under the MOU, states
would be required to propose further NOx reductions by 2003, if necessary. While
the special provisions of the MOU have not been adopted by regulation in
Delaware or Maryland, the Company likely will be required to install
post-combustion NOx control equipment on some or all of the Company's major
generating units. At this time, the Company cannot determine the potential
operating impacts and anticipated costs associated with this particular
"post-RACT" initiative.
To help attain air quality standards, the Clean Air Act mandates that the
emission of certain air pollutants by new sources or increased emissions from
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.
SALEM OPERATING PERMIT
PSE&G has informed the Company that it has settled all challenges raised by
the State of Delaware and other parties to the final five-year operating permit
for the Salem units issued by the New Jersey Department of Environmental
Protection and Energy (NJDEPE). The estimated capital cost of compliance with
the final permit is approximately $100 million, of which the Company's share is
7.41%. A settlement with challenging parties, other than Delaware, precludes
these parties from arguing that modifications to the plant's cooling water
intake system or cooling water system discharge are necessary prior to August
31, 1999. This settlement requires PSE&G to work with the challenging parties to
evaluate intake structure impingement and entrainment technologies, and
authorizes the challenging parties to recommend independent scientists to
participate on NJDEPE advisory committees regarding plant operations.
PSE&G has informed the Company that it is in the process of securing
additional permits required to implement the operating permit. No assurances can
be given as to the receipt of these additional permits, but PSE&G has reported
that it does not foresee any insurmountable obstacles.
WATER QUALITY REGULATIONS
The Delaware Department of Natural Resources and Environmental Control
(DNREC) and the Maryland Department of the Environment (MDE) promulgated major
changes to water quality regulations in 1993 which emphasize increased control
of toxic pollutants and signal a shift away from technology-based standards. In
developing the regulations, one wastewater discharge from the Indian River Power
Plant was included on a Delaware list of suspected toxic pollutant discharges.
In addition, one discharge from the Vienna Power Plant was added to the Maryland
toxic discharge list by the United States Environmental Protection Agency (EPA).
National Pollutant Discharge Elimination System (NPDES) permit modifications for
each plant are expected in 1996. The costs of complying
I-18
<PAGE>
with the final modified Delaware and Maryland regulations and the resultant
NPDES permit modifications are not expected to have a material effect on the
Company's financial position or results of operations.
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. In addition, in 1993, DNREC promulgated increased
restrictions on thermal discharge. Between 1976 and 1979 the Company submitted
to DNREC the results of environmental impact studies which demonstrated
compliance with the Clean Water Act. DNREC is in the process of requiring the
Company to update these studies to determine if the intake and discharge systems
continue to be in compliance. The studies are expected to take one to two years.
If it should be determined that the systems are not in compliance with the Clean
Water Act and/or the revised Delaware thermal limits, construction expenditures
to modify the systems could cost up 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 clean up 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 waste disposal contractor screening and
audit process.
The Company currently is a potentially responsible party (PRP) at federal
superfund sites in Philadelphia, Pennsylvania (the Metal Bank/Cottman Avenue
site); Elkton, Maryland (Galaxy/Spectron site); and Jamestown, North Carolina
(the Seaboard Chemical site); and 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). Because the Company's imputed share of the potential liabilities
at these sites is small, the Company does not expect its share of the
investigation and clean-up costs at these sites, either separately or
cumulatively, to have a material effect on the Company's financial position or
results of operations.
The Company also has two former coal gasification sites in Delaware
(Wilmington and New Castle) and one former coal gasification site in Maryland
(Cambridge), each of which is a state superfund site.
The Company completed an investigation and risk assessment of the Wilmington
Coal Gasification Site in 1987. Based on the results of that study, which was
submitted to DNREC, the Company determined that the site posed a minimal risk to
human health and the environment. At DNREC's request, in 1994, the Company
completed an updated facility evaluation and risk assessment which reaffirmed
the conclusions of the original study and indicated that there may be
contamination at the site. To gain additional information about the site, the
Company, under Delaware's Voluntary Cleanup Program, has agreed to undertake a
remedial investigation/feasibility study on the northern section of the site and
a feasibility study on the southern section. The completion of these studies
will enable the Company to assess the extent of contamination, review
remediation alternatives, and estimate the cost of cleanup or containment.
In 1994, the 3-acre New Castle site was investigated by DNREC as part of an
investigation of a 41-acre marsh. Low levels of contaminants were found
throughout the marsh. These contaminants could have originated from a number of
sources within the marsh area or from surface runoff from adjacent areas. While
DNREC has indicated that additional investigation of this coal gasification site
may be warranted, it has not directed the Company to undertake such an
investigation.
The Cambridge, Maryland coal gasification site was placed on the state
superfund list in 1984. Although the EPA recommended the site for "no further
action" in 1990, the MDE requested and received funding to undertake an expanded
site assessment (ESA) which was conducted in December 1995 and included sampling
of the adjacent creek and adjacent property. The MDE's report of
I-19
<PAGE>
findings is scheduled for completion in October 1996. At MDE's request, the
Company plans to assess site conditions further in 1996. When the MDE report is
available and the Company's investigation is completed, the Company will be able
to estimate clean-up costs, if any.
The Company has accrued a liability of $2 million for clean-up and other
potential costs related to the above federal and state superfund sites. The
Company does not expect such future costs to have a material effect on the
Company's financial position or results of operations.
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 with potential impact on the electric utility
industry is the emission of "greenhouse gases" from generating facilities, in
particular the release of carbon dioxide that 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 emissions of greenhouse gases, while satisfying its customers'
growing demand for energy. Specific actions include supporting scientific
research, continuing the Company's balanced environmental stewardship/energy
resource plans (refer to the "Energy Supply Plan" on page I-4), use of natural
gas, coal ash recycling, and enhanced energy conservation in the Company's
operations. As part of President Clinton's climate challenge action plan
introduced in October 1993, a climate challenge program was developed. Under
this program, the DOE and electric utilities will explore and promote ways in
which electric utilities can voluntarily reduce, limit, avoid or offset
emissions of carbon dioxide and other greenhouse gases. On February 3, 1995, the
Company signed the Climate Challenge Participation Accord with the U.S. DOE.
Should mandatory emissions limitations or a "carbon tax" be imposed, the
Company's operations could be affected. 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. In March 1995, one of
the Company's indirect subsidiaries, Pine Grove Landfill, Inc. (Pine Grove),
which owns and operates a solid waste disposal facility in Pennsylvania, entered
into a consent order and agreement with the Pennsylvania Department of
Environmental Protection (PADEP), which addressed alleged past violations of
state solid waste management and air quality regulations due to odors emanating
from its disposal facility. Pursuant to the terms of the consent order and
agreement, Pine Grove paid a $22,000 civil penalty and the costs of certain
environmental services and facility enhancements. Pine Grove's management
believes it has corrected the odor problem at the disposal facility. Pine
Grove's management cannot predict the nature of any actions which PADEP may take
in the event of future odor emissions. PADEP has the authority to impose fines
and/or close, limit expansion, or order changes in the business practices at the
disposal facility. The Company believes that its subsidiaries are in substantial
compliance with all environmental regulations.
RETAIL FRANCHISES
The franchises discussed below could be impacted by legislation mandating
the retail wheeling of electricity. For a further discussion on the development
of competition in retail markets, refer to "Electric Retail Business" on page
I-2 and the "Strategic Plans for Competition" section of the MD&A of the
Company's 1995 Annual Report to Stockholders filed as Exhibit 13.
I-20
<PAGE>
The Company holds franchises, which for the most part are perpetual, 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 holds franchises, which for the most part are perpetual, 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 holds 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, 1995 was
2,527.
A total of 1,457 employees are represented by the International Brotherhood
of Electrical Workers Locals 1238 (Northern) and 1307 (Southern) whose contracts
with the Company expire on December 15, 1996 and June 25, 1997, respectively.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, and positions of all of the executive officers of the
Company as of December 31, 1995 are listed below, along with their business
experiences 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.
I-21
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
(AS OF DECEMBER 31, 1995)
<TABLE>
<CAPTION>
NAME, AGE AND POSITION BUSINESS EXPERIENCE DURING PAST 5 YEARS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Howard E. Cosgrove, 52.................................. Elected 1992. President and Chief Operating
Chairman of the Board, President, and Officer from 1991 to 1992.
Chief Executive Officer and Director
Joseph W. Ford, 49...................................... Elected 1995. Director, Corporate Re-
Senior Vice President Engineering, Sales & Marketing Worldwide, Digital
Corporation, Boston, Massachusetts, from 1993 to 1994.
Director Business Development United States, Digital
Corporation, Boston, Massachusetts from 1992 to 1993.
Vice President, Sales and Marketing, Asia Region,
Digital Corporation, Hong Kong, from 1991 to 1992.
Barbara S. Graham, 47................................... Elected 1995. Vice President and Chief
Senior Vice President, Treasurer, and Chief Financial Financial Officer from 1992 to 1994. Treasurer from 1987
Officer to 1992.
Ralph E. Klesius, 53.................................... Elected 1992. Vice President, Engineering from
Senior Vice President and Environmental Compliance 1988 to 1992.
Officer
Thomas S. Shaw, 48...................................... Elected 1992. Vice President/President,
Senior Vice President/President, Delmarva Capital Delmarva Capital Investments, Inc. from 1991 to 1992.
Investments, Inc.
Donald E. Cain, 50...................................... Elected 1988.
Vice President, Administration
Paul S. Gerritsen, 50................................... Elected 1993. Vice President and Chief
Vice President Financial Officer from 1987 to 1992.
Wayne A. Lyons, 56...................................... Elected 1990.
Vice President
Frank J. Perry Jr., 52.................................. Elected 1990.
Vice President, Production
Jack Urban, 52.......................................... Elected 1991.
Vice President, Gas Division
James P. Lavin, 48...................................... Elected 1993. Comptroller-Corporate and Chief
Comptroller and Chief Accounting Officer Accounting Officer from 1989 to 1993.
</TABLE>
I-22
<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 summer electric generating capacity available to the Company to serve
its peak load as of December 31, 1995.
<TABLE>
<CAPTION>
NET INSTALLED
CAPACITY
STATION LOCATION (KWH)
- ------- -------- --------------
<S> <C> <C>
COAL-FIRED
Edge Moor................... Wilmington, DE.................... 251,000
Indian River................ Millsboro, DE..................... 743,000
Conemaugh................... New Florence, PA.................. 63,000(A)
Keystone.................... Shelocta, PA...................... 63,000(A)
-------------
1,120,000
-------------
OIL-FIRED
Edge Moor................... Wilmington, DE.................... 435,000
Vienna...................... Vienna, MD........................ 151,000
-------------
586,000
-------------
COMBUSTION TURBINES/COMBINED CYCLE
Hay Road.................... Wilmington, DE.................... 511,000
------------
NUCLEAR
Peach Bottom................ Peach Bottom Twp., PA............. 164,000(A)
Salem....................... Lower Alloways Creek Twp., NJ..... 164,000(A)
-------------
328,000
-------------
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)
-------------
Subtotal...................................................... 2,832,800
-------------
PURCHASED PJM INTERCONNECTION CAPACITY CREDITS.................... 50,000
-------------
Total......................................................... 2,882,800
-------------
-------------
</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-23
<PAGE>
Major transmission and distribution lines owned and in service are as
follows:
<TABLE>
<CAPTION>
VOLTAGE CIRCUIT MILES
- ------- -------------
<S> <C>
Transmission:
500 kilovolts (kV)........................................ 16
230 kV.................................................... 326
138 kV.................................................... 447
69 kV.................................................... 716
Distribution:
34 kV..................................................... 604
25 kV and below........................................... 8,985
</TABLE>
The Company's electric transmission and distribution system includes 1,391
transmission poleline miles of overhead lines, 5 transmission cable miles of
underground cables, 7,123 distribution poleline miles of overhead lines, and
5,268 distribution cable miles of 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 maximum planned
daily 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:
Transmission Mains................................. 107*
Distribution Mains................................. 1,487
Service Lines...................................... 1,069
* 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
As previously reported, in June 1993, the Delaware Coastal Zone Industrial
Control Board adopted regulations (the Regulations) under the Delaware Coastal
Zone Act which would have, among other things, prohibited the Company from
constructing new power-generating facilities or expanding any of its existing
power-generating facilities outside a designated boundary. The Company filed
proceedings in the Delaware Superior Court, and joined with other affected
parties to file a complaint in the Delaware Chancery Court, seeking to have the
Regulations declared null and void. On May 19, 1994, the Chancery Court found
for the Company and the other plaintiffs by declaring the Regulations null and
void on procedural grounds. The proceedings in the Superior Court, which were
suspended pending the outcome in the Chancery Court, are expected to be
dismissed.
For a discussion of the Company's lawsuit against Westinghouse, refer to
"Salem Units" on page I-7.
For a discussion of the Company's lawsuit against Public Service Enterprise
Group, Inc. and PSE&G, refer to "Salem Units" on page I-7.
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 1995 and 1994.
<TABLE>
<CAPTION>
1995
---------------------------------
DIVIDEND --------------------
DECLARED HIGH LOW
----------- --------- ---------
<S> <C> <C> <C>
First Quarter................ $ .38 1/2 $ 20 $ 17 7/8
Second Quarter............... $ .38 1/2 $ 21 1/4 $ 19 1/8
Third Quarter................ $ .38 1/2 $ 23 $ 19 1/2
Fourth Quarter............... $ .38 1/2 $ 23 5/8 $ 21 7/8
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------
PRICE PRICE
DIVIDEND --------------------
DECLARED HIGH LOW
----------- -------- ----------
<S> <C> <C> <C>
First Quarter................ $ .38 1/2 $ 23 5/8 $ 20 1/2
Second Quarter............... $ .38 1/2 $ 21 $ 16 7/8
Third Quarter................ $ .38 1/2 $ 20 $ 17 3/4
Fourth Quarter............... $ .38 1/2 $ 19 1/4 $ 17 5/8
</TABLE>
The Company had 56,646 registered holders of common stock as of December 31,
1995.
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 the MD&A of the 1995 Annual Report to Stockholders
filed herein as Exhibit 13, which portion of such Annual Report is hereby
incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
This information is contained on page 20 of the 1995 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 21 through 28 of the 1995 Annual
Report to Stockholders filed herein as Exhibit 13, which portion of such Annual
Report is hereby incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, notes 1 through 20 to consolidated
financial statements, and related report thereon of Coopers & Lybrand L.L.P.,
independent accountants, appear on pages 29 through 47 of the 1995 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>
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 25, 1996, 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 25,
1996.
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 25, 1996.
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 1995 Annual Report to Stockholders filed as
Exhibit 13 hereto and incorporated herein by reference.
<TABLE>
<CAPTION> 1995
ANNUAL REPORT
FINANCIAL STATEMENTS (PAGE)
-------------------- -------------
<S> <C>
Consolidated Statements of Income for the three years
ended December 31, 1995....................................... 30
Consolidated Statements of Cash Flows for the three
years ended December 31, 1995................................. 31
Consolidated Balance Sheets as of December 31, 1995
and 1994...................................................... 32 and 33
Consolidated Statements of Capitalization as of
December 31, 1995 and 1994.................................... 34
Consolidated Statements of Changes in Common
Stockholders' Equity for the three years ended
December 31, 1995............................................. 35
Notes to Consolidated Financial Statements...................... 36 to 47
</TABLE>
2. Financial Statement Schedules -- No financial statement schedules
have been filed since the required information is 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, 1995 can be found on page IV-3 of this report.
4. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<S> <C>
2 Stock Purchase Agreement between PECO Energy Company and Delmarva Power & Light Company related to the
acquisition of Conowingo Power Company. (Filed with Form 10-K for the year ended December 31, 1994, File
No. 1-1405.)
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. (Filed with Registration Statement No. 33-53855.)
3-D Copy of the Company's By-Laws as amended September 30, 1993. (Filed with Form 10-K for the year ended
December 31, 1993, File No. 1-1405.)
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 Registration Statement No. 33-39756.)
4-C Copies of the Seventieth through Seventy-Fourth Supplemental Indentures. (Filed with Registration
Statement No. 33-24955.)
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.)
</TABLE>
IV-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -----------
<S> <C>
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 Registration Statement No. 33-63582.)
4-I Copy of the Eighty-Third Supplemental Indenture. (Filed with Registration Statement No. 33-50453.)
4-J Copies of the Eighty-Fourth through Eighty-Eighth Supplemental Indentures. (Filed with Registration
Statement No. 33-53855.)
4-K Copies of the Eighty-Ninth and Ninetieth Supplemental Indentures. (Filed with Registration Statement No.
333-00505.)
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, File No. 1-1405.)
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, File No. 1-1405.)
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, File No. 1-1405.)
10-D Copies of amendments to the Supplemental Executive Retirement Plan, effective June 15, 1994, and
November 1, 1994. (Filed with Form 10-K for the year ended December 31, 1994, File No. 1-1405.)
10-E 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, File No. 1-1405.)
10-F 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, File
No. 1-1405.)
10-G Copy of the severance agreement with members of management. (Filed with Form 10-K for the year ended
December 31, 1994, File No. 1-1405.)
10-H Copy of the current listing of members of management who have signed the severance agreement.
10-I 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, File No. 1-1405.)
10-J Copy of the Deferred Compensation Plan, effective as of January 1, 1996.
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 1995 Annual Report to Stockholders which are incorporated by reference in this
Form 10-K.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K (filed during the reporting period):
A Report on Form 8-K dated October 20, 1995, updating matters related to
Salem Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated December 15, 1995, updating matters related to
Salem Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated February 22, 1996, updating matters related to
Salem Units 1 and 2 previously reported, was filed with the Commission.
IV-2
<PAGE>
DELMARVA POWER & LIGHT COMPANY
SCHEDULE OF OPERATING STATISTICS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
The table below sets forth selected financial and operating statistics for
the electric and gas divisions for the three years ended December 31, 1995.
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
ELECTRIC:
Electricity generated and purchased (MWh):
Generated............................................................ 10,797,547 11,581,929 11,264,540
Purchased............................................................ 3,977,867 3,766,169 3,857,133
Interchange deliveries............................................... (1,862,467) (2,220,898) (2,225,384)
----------- ----------- -----------
Total output for load.............................................. 12,912,947 13,127,200 12,896,289
----------- ----------- -----------
----------- ----------- -----------
Electric sales (MWh):
Residential.......................................................... 3,829,807 3,578,743 3,499,387
Commercial........................................................... 3,744,879 3,461,058 3,336,847
Industrial........................................................... 3,351,834 3,248,131 3,232,233
Resale............................................................... 1,213,459 2,166,154 2,131,920
Other sales (1)...................................................... 170,942 50,996 79,843
----------- ----------- -----------
Total sales........................................................ 12,310,921 12,505,082 12,280,230
Losses and miscellaneous system uses................................... 602,026 622,118 616,059
----------- ----------- -----------
Total disposition of energy.......................................... 12,912,947 13,127,200 12,896,289
----------- ----------- -----------
----------- ----------- -----------
Operating revenue (thousands):
Residential.......................................................... $344,351 $312,224 $305,446
Commercial........................................................... 267,239 242,506 237,785
Industrial........................................................... 155,108 145,594 150,178
Resale............................................................... 58,680 105,350 104,983
Other sales revenues (2)............................................. 14,211 6,816 9,716
Interchange deliveries............................................... 47,271 62,388 61,437
Miscellaneous revenues............................................... 12,802 8,237 6,118
----------- ----------- -----------
Total revenues..................................................... $899,662 $883,115 $875,663
----------- ----------- -----------
----------- ----------- -----------
Number of customers (end of period):
Residential.......................................................... 386,948 347,997 342,710
Commercial........................................................... 48,345 44,060 43,324
Industrial........................................................... 704 699 715
Resale............................................................... 12 12 12
Other................................................................ 641 604 593
----------- ----------- -----------
Total customers.................................................... 436,650 393,372 387,354
----------- ----------- -----------
----------- ----------- -----------
Average annual use per residential customer (kWh) (3).................. 10,365 10,359 10,336
Average annual revenue per residential customer (3).................... $931.95 $903.74 $902.14
Average revenue per kWh (cents):
Residential.......................................................... 9.0 8.7 8.7
Commercial........................................................... 7.1 7.0 7.1
Industrial........................................................... 4.6 4.5 4.7
GAS:
Gas sales (Mcf)........................................................ 18,478 18,087 18,066
Gas transported (Mcf).................................................. 2,893 2,255 1,539
Gas revenue (thousands)................................................ $95,441 $107,906 $94,944
Number of customers (end of period):
Residential.......................................................... 90,890 88,518 86,027
Commercial........................................................... 7,369 6,982 6,751
Industrial........................................................... 146 150 150
Interruptible and other.............................................. 12 12 12
----------- ----------- -----------
Total customers.................................................... 98,417 95,662 92,940
----------- ----------- -----------
----------- ----------- -----------
Residential gas service:
Average annual use per customer (Mcf) (3)............................ 81.75 88.55 86.85
Average annual revenue per customer (3).............................. $525.87 $632.11 $558.59
Average revenue per Mcf.............................................. $6.43 $7.14 $6.43
</TABLE>
- ------------------------------
(1) Includes unbilled sales.
(2) Includes unbilled revenues.
(3) Based on average number of customers during period.
IV-3
<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 26, 1996 By /s/BARBARA S. GRAHAM
-------------------------------------
(BARBARA S. GRAHAM, SENIOR VICE PRESIDENT,
TREASURER, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HOWARD E. COSGROVE Chairman of the Board, President,
------------------------------------------- Chief Executive Officer, and March 26, 1996
(HOWARD E. COSGROVE) Director
/s/ BARBARA S. GRAHAM
------------------------------------------- Senior Vice President, Treasurer, and March 26, 1996
(BARBARA S. GRAHAM) Chief Financial Officer
/s/ JAMES P. LAVIN
------------------------------------------- Comptroller and Chief Accounting March 26, 1996
(JAMES P. LAVIN) Officer
/s/ MICHAEL G. ABERCROMBIE
------------------------------------------- Director March 26, 1996
(MICHAEL G. ABERCROMBIE)
/s/ R. FRANKLIN BALOTTI
------------------------------------------- Director March 26, 1996
(R. FRANKLIN BALOTTI)
/s/ ROBERT D. BURRIS
------------------------------------------- Director March 26, 1996
(ROBERT D. BURRIS)
/s/ AUDREY K. DOBERSTEIN
------------------------------------------- Director March 26, 1996
(AUDREY K. DOBERSTEIN)
/s/ M. B. EMERY
------------------------------------------- Director March 26, 1996
(MICHAEL B. EMERY)
/s/ J. H. GILLIAM, JR.
------------------------------------------- Director March 26, 1996
(JAMES H. GILLIAM, JR.)
/s/ SARAH I. GORE
------------------------------------------- Director March 26, 1996
(SARAH I. GORE)
------------------------------------------- Director
(JAMES C. JOHNSON)
/s/ WESTON E. NELLIUS
------------------------------------------- Director March 26, 1996
(WESTON E. NELLIUS)
</TABLE>
IV-4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------
OR
/ / 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 and Virginia 51-0084283
--------------------------- ---------------------
(States of incorporation) (I.R.S. Employer
Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
--------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 302-429-3359
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1996
----------------------------- ----------------------------
Common Stock, $2.25 par value 60,697,635 Shares
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
Table of Contents
-----------------
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995................................... 2-3
Consolidated Statements of Income for the three and
six months ended June 30, 1996 and 1995................. 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995..................... 5
Notes to Consolidated Financial Statements.............. 6-11
Selected Financial and Operating Data................... 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 13-19
Part II. Other Information and Signature........................... 20-26
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
ASSETS
------
<S> <C> <C>
UTILITY PLANT, AT ORIGINAL COST:
Electric...................................... $2,985,098 $2,942,969
Gas........................................... 215,200 208,245
Common........................................ 131,234 130,949
---------- ----------
3,331,532 3,282,163
Less: Accumulated depreciation............... 1,240,034 1,189,269
---------- ----------
Net utility plant in service.................. 2,091,498 2,092,894
Construction work-in-progress................. 110,156 105,588
Leased nuclear fuel, at amortized cost........ 30,217 31,661
---------- ----------
2,231,871 2,230,143
---------- ----------
INVESTMENTS AND NONUTILITY PROPERTY:
Investment in leveraged leases................ 47,294 48,367
Funds held by trustee......................... 34,443 36,275
Other investments and nonutility property, net 54,185 54,781
---------- ----------
135,922 139,423
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents..................... 38,129 28,951
Accounts receivable:
Customers................................. 112,854 116,606
Other..................................... 23,236 14,630
Deferred energy costs......................... 15,188 --
Inventories, at average cost:
Fuel (coal, oil, and gas)................. 27,923 30,076
Materials and supplies.................... 35,973 36,823
Prepayments................................... 4,970 12,969
Deferred income taxes, net.................... -- 5,400
---------- ----------
258,273 245,455
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS:
Prepaid pension cost.......................... 24,199 16,899
Unamortized debt expense...................... 11,892 12,256
Deferred debt refinancing costs............... 22,669 23,972
Deferred recoverable income taxes............. 144,406 151,250
Other......................................... 53,160 47,287
---------- ----------
256,326 251,664
---------- ----------
TOTAL ASSETS $2,882,392 $2,866,685
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-2-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
CAPITALIZATION AND LIABILITIES
------------------------------
<S> <C> <C>
CAPITALIZATION:
Common stock, $2.25 par value; 90,000,000
shares authorized; shares issued: 1996--
60,763,085, 1995--60,760,685.............. $136,717 $136,713
Additional paid-in capital.................... 506,509 506,328
Retained earnings............................. 287,824 281,862
---------- ----------
931,050 924,903
Treasury shares, at cost: 1996--65,450,
1995--1,320............................... (1,397) (30)
Unearned compensation......................... (1,011) (1,433)
---------- ----------
Total common stockholders' equity......... 928,642 923,440
Preferred stock............................... 168,085 168,085
Long-term debt................................ 853,269 853,904
---------- ----------
1,949,996 1,945,429
---------- ----------
CURRENT LIABILITIES:
Short-term debt............................... 93,843 63,154
Long-term debt due within one year............ 1,522 1,485
Variable rate demand bonds.................... 86,500 86,500
Accounts payable.............................. 59,783 64,056
Taxes accrued................................. -- 4,802
Interest accrued.............................. 16,643 16,355
Dividends declared............................ 23,314 23,426
Current capital lease obligation.............. 12,583 12,604
Deferred energy costs......................... -- 222
Deferred income taxes, net.................... 3,303 --
Other......................................... 27,357 33,595
---------- ----------
324,848 306,199
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes, net.................... 514,773 519,597
Deferred investment tax credits............... 43,781 45,061
Long-term capital lease obligation............ 19,234 20,768
Other......................................... 29,760 29,631
---------- ----------
607,548 615,057
---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $2,882,392 $2,866,685
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric.............................................. $227,972 $192,359 $474,911 $407,768
Gas................................................... 22,621 20,869 68,312 63,060
-------- -------- -------- --------
250,593 213,228 543,223 470,828
-------- -------- -------- --------
OPERATING EXPENSES
Electric fuel and purchased energy.................... 72,106 56,807 153,825 130,688
Gas purchased......................................... 12,821 12,679 36,564 35,766
Purchased electric capacity........................... 7,432 2,027 16,953 2,737
Operation and maintenance............................. 64,083 59,065 127,732 111,993
Depreciation.......................................... 30,941 27,358 60,574 54,241
Taxes other than income taxes......................... 10,037 8,832 21,126 18,899
Income taxes.......................................... 14,650 12,282 37,366 34,074
-------- -------- -------- --------
212,070 179,050 454,140 388,398
-------- -------- -------- --------
OPERATING INCOME....................................... 38,523 34,178 89,083 82,430
-------- -------- -------- --------
OTHER INCOME
Nonutility Subsidiaries
Revenues and gains................................... 14,806 13,025 28,113 25,456
Expenses including interest and income taxes......... (14,208) (12,435) (25,462) (22,967)
-------- -------- -------- --------
Net earnings of nonutility subsidiaries.......... 598 590 2,651 2,489
Allowance for equity funds used during
construction........................................ 256 187 481 371
Other income, net of income taxes..................... (227) 262 (309) 648
-------- -------- -------- --------
627 1,039 2,823 3,508
-------- -------- -------- --------
INCOME BEFORE UTILITY INTEREST CHARGES................. 39,150 35,217 91,906 85,938
-------- -------- -------- --------
UTILITY INTEREST CHARGES
Interest expense...................................... 17,513 16,318 35,732 32,172
Allowance for borrowed funds used during
construction........................................ (688) (545) (1,294) (1,086)
-------- -------- -------- --------
16,825 15,773 34,438 31,086
-------- -------- -------- --------
NET INCOME............................................. 22,325 19,444 57,468 54,852
DIVIDENDS ON PREFERRED STOCK........................... 2,423 2,482 4,863 5,001
-------- -------- -------- --------
EARNINGS APPLICABLE TO COMMON STOCK.................... $19,902 $16,962 $52,605 $49,851
======== ======== ======== ========
COMMON STOCK
Average shares outstanding (000)...................... 60,703 60,109 60,731 59,923
Earnings per average share............................ $0.33 $0.28 $0.87 $0.83
Dividends declared per share.......................... $0.38 1/2 $0.38 1/2 $0.77 $0.77
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
DELMARVA POWER & LIGHT COMPANY
------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $57,468 $54,852
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization......................... 63,467 59,256
Allowance for equity funds used during construction... (481) (371)
Investment tax credit adjustments, net................ (1,280) (1,317)
Deferred income taxes, net............................ 10,724 (3,170)
Net change in :
Accounts receivable................................. (4,854) 11,873
Inventories......................................... 3,003 12,659
Accounts payable.................................... (4,273) (12,694)
Other current assets & liabilities*................. (20,252) 19,350
Other, net............................................ (4,512) (2,330)
-------- --------
Net cash provided by operating activities..................... 99,010 138,108
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures, excluding allowance for funds
used during construction................................ (61,191) (55,433)
Allowance for borrowed funds used during construction..... (1,294) (1,086)
Acquisition of COPCO, net of cash acquired................ -- (148,837)
Investment in subsidiary projects and operations.......... (1,656) (1,025)
Decrease in bond proceeds held in trust funds............. 5,118 4,971
Deposits to nuclear decommissioning trust funds........... (2,119) (1,493)
Other, net................................................ (3,134) 1,618
-------- --------
Net cash used by investing activities......................... (64,276) (201,285)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends: Common........................................ (46,669) (45,870)
Preferred..................................... (4,950) (4,800)
Issuance of common stock.................................. 50 12,624
Purchase of common stock.................................. (1,055) (1,253)
Issuance of long-term debt................................ -- 125,800
Retirement of long-term debt.............................. (621) (566)
Principal portion of capital lease payments............... (2,893) (5,015)
Net change in term loan................................... -- (20,226)
Net change in short-term debt ............................ 30,689 12,201
Cost of issuances......................................... (107) (1,148)
-------- --------
Net cash provided/(used) by financing activities.............. (25,556) 71,747
-------- --------
Net change in cash and cash equivalents....................... 9,178 8,570
Cash and cash equivalents at beginning of period.............. 28,951 25,029
-------- --------
Cash and cash equivalents at end of period.................... $38,129 $33,599
======== ========
</TABLE>
*Other than debt classified as current and current deferred income taxes.
See accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
----------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The statements reflect all adjustments
necessary in the opinion of the Company for a fair presentation of interim
results. They should be read in conjunction with the Company's 1995 Annual
Report to Stockholders, the Company's Report on Form 10-Q for the first
quarter of 1996, and Part II of this Report on Form 10-Q for additional
relevant information.
2. PURCHASE OF CONOWINGO POWER COMPANY
-----------------------------------
As previously disclosed in Note 4 to the Consolidated Financial Statements
of the Company's 1995 Annual Report to Stockholders, on June 19, 1995, the
Company acquired Conowingo Power Company (COPCO), which was merged into the
Company and now is being operated as the Conowingo District. Operating
results of the Conowingo District after June 19, 1995, are included in the
Company's Consolidated Statements of Income.
3. PENDING MERGER WITH ATLANTIC ENERGY, INC.
-----------------------------------------
As previously reported in detail in the Company's Report on Form 8-K dated
August 9, 1996, and filed August 14, 1996, the Company, Atlantic Energy,
Inc., a New Jersey corporation headquartered in Egg Harbor Township, New
Jersey (AE), DS, Inc., a Delaware corporation which has been newly formed
to accomplish this transaction (Newco), and DS Sub, Inc., a newly-formed
Delaware corporation, and a wholly-owned subsidiary of Newco (Sub), have
entered into an Agreement and Plan of Merger, dated as of August 9, 1996
(the Merger Agreement), which provides for a business combination of the
Company and AE as peer firms in a merger of equals (the Transaction). The
outstanding stock of Newco is owned 50% by the Company and 50% by AE.
As a result of the Transaction, Newco will become the holding company of
the combined enterprise and will be registered under the Public Utility
Holding Company Act of 1935, as amended. The name of Newco will be
changed as agreed upon by the Boards of Directors of the Company and AE.
Newco will be the parent company of both the Company and Atlantic City
Electric Company, which currently is AE's regulated utility subsidiary.
The Transaction, which was approved unanimously by the Boards of Directors
of the Company and AE on August 9, 1996, is expected to close shortly
after all of the conditions to the consummation of the Transaction,
including obtaining applicable regulatory approvals, are met or waived.
The regulatory approval process is expected to take approximately 12 to
18 months.
-6-
<PAGE>
4. SALEM NUCLEAR GENERATING STATION
--------------------------------
The Company owns 7.41% of Salem Nuclear Generating Station (Salem), which
consists of two pressurized water nuclear reactors (PWR) and is operated by
Public Service Electric & Gas Company (PSE&G). As of June 30, 1996, the
Company's net investment in plant in service for Salem was approximately
$56 million for Unit 1 and $60 million for Unit 2, including common plant
allocated between the two units. Each unit represents approximately 2% of
the Company's total assets and approximately 3% of the Company's installed
electric generating capacity.
Salem Units 1 and 2 were removed from operation by PSE&G on May 16, 1995,
and June 7, 1995, respectively, due to operational problems and maintenance
concerns. Their return dates are subject to completion of the requirements
of their respective restart plans to the satisfaction of PSE&G and the
Nuclear Regulatory Commission (NRC), which encompasses a substantial review
and improvement of personnel, process, and equipment issues.
With respect to Unit 1, PSE&G informed the Company in early 1996 that
inspections of the steam generators using a new testing technology
indicated degradation in a significant number of tubes. After evaluating
several options, in May 1996 the Salem co-owners signed an agreement to
purchase the steam generators from the owner of the unfinished Seabrook
Unit 2 nuclear power plant in New Hampshire for installation in Salem Unit
1. By using these steam generators, PSE&G expects to return Unit 1 to
service in mid-1997. The Company's share of the cost of the steam
generators, including installation, will range from approximately $11
million to $13 million and will be capitalized.
With respect to Unit 2, PSE&G also informed the Company in early 1996 that
inspections of the steam generators using the new testing technology
confirmed that the condition of the generators is within current repair
limits. On July 22, 1996, PSE&G announced that although substantial
progress has been made in upgrading Unit 2's 46 major systems, some of
the originally scheduled work, along with additional work that had since
been identified, remained to be completed and that the outage at Unit 2
would continue well into the fourth quarter of 1996. PSE&G believes that
the change to the Unit 2 schedule is not expected to impact the restart of
Unit 1.
In 1995, the Company incurred higher than expected operation and
maintenance costs at Salem of approximately $5 million, which were expensed
as incurred. Based on PSE&G's current estimates, the Company estimates
that its share of additional operation and maintenance costs associated
with the outage in 1996 will range from $7 million to $10 million.
-7-
<PAGE>
The Company incurs replacement power costs while the units are out of
service of approximately $750,000 per month, per unit. Such amounts vary,
however, depending on the cost and availability of other Company-owned
generation and the cost of purchased energy. Replacement power costs
typically are not incurred for routine refueling and maintenance outages,
and the recovery of replacement power costs is subject to approval by the
regulatory commissions having jurisdiction over the Company. From the
inception of the Salem unit outages through June 30, 1996, approximately
one-half of the current estimated replacement power costs of $14 million
has been expensed and the remaining portion has been deferred on the
Company's Consolidated Balance Sheet in expectation of future recovery.
Beginning in mid-June 1996, the Company considers Unit 1 to be in a
separate outage for replacement of its steam generators, which is a generic
issue affecting many nuclear power plants. Based on the regulatory
treatment of generic nuclear plant issues by the commissions having
jurisdiction over the Company and the regulatory treatment of the
replacement of steam generators at other nuclear plants by other
commissions, the Company does not consider Unit 1 to be incurring
replacement power costs after mid-June 1996.
The actual costs to be incurred by the Company may vary from the foregoing
estimates, since the periods during which the Salem units will be out of
service, the extent of the maintenance that will be required, and the costs
of replacement power and the extent of its recovery may be different from
those currently anticipated.
In May 1996, the Company filed an application with the Virginia State
Corporation Commission (VSCC) for increased fuel rates effective July 1996.
In June 1996, the Company filed an application with the Maryland Public
Service Commission (MPSC) for increased fuel rates effective August 1996.
In both filings, the Company proposed that one-half of the replacement
power costs associated with the Salem outage be permitted on an interim
basis until a full review of the outage is made at a future time. The VSCC
and MPSC approved the Company's filings, with rates subject to refund.
During the third quarter of 1996, the Company plans to file a proposal with
the Delaware Public Service Commission (DPSC) to address the recovery of
replacement power costs.
-8-
<PAGE>
On February 27, 1996, the co-owners of Salem, including the Company, filed
a complaint in the United States District Court for the District of New
Jersey against Westinghouse Electric Corporation (Westinghouse), the
designer and manufacturer of the Salem steam generators. The complaint,
which seeks to recover from Westinghouse the costs associated with and
resulting from the cracks discovered in Salem's steam generators and with
replacing such steam generators, alleges violations of federal and New
Jersey Racketeer Influenced and Corrupt Organizations Acts, fraud,
negligent misrepresentation, and breach of contract. The Salem co-owners
contend that the recently-discovered degradation of the steam generators
will prevent the steam generators from operating for a design life of 40
years. The lawsuit asserts that the Salem steam generators ultimately will
require replacement and these costs should be borne by Westinghouse and not
the customers and shareholders of the Salem co-owners. Westinghouse filed
an answer and a $2.5 million counterclaim for unpaid work on April 30,
1996. On June 17, 1996, the Court ordered the parties to mediate their
claims rather than proceeding to litigation, taking the position that
Westinghouse's involvement in steam generator lawsuits throughout the
country, involving substantially similar issues as are involved in the
Salem litigation, should enable the parties to resolve their dispute
efficiently in mediation. This mediation would be non-binding on the
parties and its purpose would be to enable the mediator to evaluate the
parties' respective positions and to facilitate the parties' settlement
discussions. If mediation fails to result in settlement, the parties will
proceed to litigation. The Company cannot predict the outcome of this
lawsuit.
On March 5, 1996, the Company and PECO Energy Company (PECO) filed a
complaint in the United States District Court for the Eastern District of
Pennsylvania against Public Service Enterprise Group, Inc. (Enterprise) and
PSE&G. The lawsuit alleges that the defendants failed to heed numerous
citations, warnings, notices of violations, and fines by the NRC as well as
repeated warnings from the Institute of Nuclear Power Operations about
performance, safety, and management problems at Salem and to take
appropriate corrective action. The suit contends that as a result of these
actions and omissions, the Salem units were forced to shut down in 1995.
The suit asks for compensatory damages for breach of contract, negligence,
and punitive damages, in amounts to be specified. The Company cannot
predict the outcome of this lawsuit. A similar complaint has been filed
against Enterprise and PSE&G in the Superior Court of New Jersey by the
remaining co-owner, Atlantic City Electric Company.
5. CONTINGENCIES
-------------
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.
-9-
<PAGE>
The co-owners of the Peach Bottom Atomic Power Station (Peach Bottom) and
Salem maintain property insurance coverage in the aggregate amount of
$2.8 billion for each unit for loss or damage to the units, including
coverage for decontamination expense and premature decommissioning. The
Company is self-insured, to the extent of its ownership interest, for its
share of property losses in excess of insurance coverage. Under the
terms of the various insurance agreements, the Company could be assessed
up to $5.4 million in any policy year for losses incurred at nuclear
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.
The property damage and replacement power policies discussed above do not
cover the operational problems and maintenance concerns, including the
steam generator degradation, which caused PSE&G to remove Salem Units 1
and 2 from operation and to keep the units shut down.
Environmental Matters
- ---------------------
As previously disclosed under "Hazardous Substances" on page I-19 of the
Company's 1995 Annual Report on Form 10-K, the disposal of
Company-generated hazardous substances can result in costs to clean up
facilities found to be contaminated due to past disposal practices. The
Company is currently a potentially responsible party at three federal
superfund sites and is alleged to be a third-party contributor at three
other federal superfund sites. The Company also has two former coal
gasification sites in Delaware and one former coal gasification site in
Maryland which are state superfund sites. The Company is currently
participating with the States of Delaware and Maryland in evaluating
these sites to assess the extent of contamination and risk to the
environment. As of June 30, 1996, the Company had accrued a liability of
$2 million representing its estimate of site study and cleanup costs for
all of its federal and state superfund sites.
Power Outage
- ------------
Refer to Part II, Item 1, "Power Outage," of this Form 10-Q for a
discussion of a May 14, 1996, power outage.
Other
- -----
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 proceedings will not have
a material effect on the Company's financial position or results of
operations.
-10-
<PAGE>
6. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
(Dollars in Thousands) 1996 1995
-------- --------
<S> <C> <C>
Cash paid for
Interest, net of amounts
capitalized $32,923 $29,363
Income taxes, net of refunds $33,181 $41,472
</TABLE>
7. NONUTILITY SUBSIDIARIES
-----------------------
The following presents condensed financial information of the Company's
nonregulated wholly-owned subsidiaries: Delmarva Capital Investments, Inc.;
Delmarva Energy Company; and Delmarva Industries, Inc. A subsidiary that
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>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(Dollars in Thousands) 1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues and gains
Landfill and waste hauling $4,520 $3,593 $7,733 $6,775
Operating services 5,511 7,414 10,225 13,179
Real estate 4,258 245 6,074 471
Leveraged leases 167 1,422 317 1,516
Other revenue 350 351 3,764 3,515
------- ------- ------- -------
14,806 13,025 28,113 25,456
------- ------- ------- -------
Cost and expenses
Operating expenses 13,679 12,012 23,754 21,423
Interest expense, net 281 71 450 145
Income taxes 248 352 1,258 1,399
------- ------- ------- -------
14,208 12,435 25,462 22,967
------- ------- ------- -------
Net income $ 598 $ 590 $ 2,651 $ 2,489
======= ======= ======= =======
Earnings per share of common
stock attributed to subsidiaries $0.01 $0.01 $0.04 $0.04
</TABLE>
-11-
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
-------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30 June 30
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ELECTRIC REVENUES
- -----------------
Residential $79,893 $65,320 $189,196 $149,911
Commercial 66,854 59,947 135,327 118,748
Industrial 38,104 36,847 76,427 72,911
Resale 14,474 10,572 33,737 26,670
Other Sales Revenues (1) 7,787 5,767 2,045 3,942
---------- ---------- ---------- ----------
Sales Revenues 207,112 178,453 436,732 372,182
Interchange Deliveries 17,540 10,929 31,335 29,802
Miscellaneous Revenues 3,320 2,977 6,844 5,784
---------- ---------- ---------- ----------
Total Electric Revenues $227,972 $192,359 $474,911 $407,768
========== ========== ========== ==========
ELECTRIC SALES
(1000 kWh)
- --------------
Residential 878,581 710,698 2,238,408 1,750,702
Commercial 930,745 832,249 1,938,606 1,709,908
Industrial 810,128 801,694 1,624,391 1,602,739
Resale 263,583 215,755 665,762 535,997
Other sales (2) 50,679 30,272 (49,527) (16,915)
---------- ---------- ---------- ----------
Total Electric Sales 2,933,716 2,590,668 6,417,640 5,582,431
========== ========== ========== ==========
GAS REVENUES
- ------------
Firm Sales (1) $20,172 $18,121 $65,396 $58,761
Non-firm Sales, Gas Transportation,
and Miscellaneous Revenues 2,449 2,748 2,916 4,299
---------- ---------- ---------- ----------
Total Gas Revenues $22,621 $20,869 $68,312 $63,060
========== ========== ========== ==========
GAS SALES AND GAS TRANSPORTED
(1000 mcf)
- -----------------------------
Firm Sales (2) 2,909 2,820 10,886 9,725
Non-firm Sales and Gas Transported 1,532 1,370 2,161 2,403
---------- ---------- ---------- ----------
Total 4,441 4,190 13,047 12,128
========== ========== ========== ==========
<CAPTION>
June 30, 1996 December 31, 1995
------------------------- -------------------------
$ % $ %
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CAPITALIZATION
- --------------
Variable Rate Demand Bonds (3) $86,500 4.2 $86,500 4.3
Long-Term Debt 853,269 41.9 853,904 42.0
Preferred Stock 168,085 8.3 168,085 8.3
Common Stockholders' Equity 928,642 45.6 923,440 45.4
---------- ---------- ---------- ----------
Total $2,036,496 100.0 $2,031,929 100.0
========== ========== ========== ==========
</TABLE>
(1) Includes unbilled revenues.
(2) Includes unbilled sales.
(3) The Company intends to use the bonds as a source of long-term financing
as discussed in Note 12 to the Consolidated Financial Statements of the
1995 Annual Report.
-12-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
EARNINGS SUMMARY
- ----------------
The earnings per average share of common stock attributed to the core
utility business and nonutility subsidiaries are shown below.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
---------------- ------------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Core Utility $0.32 $0.27 $0.83 $0.79
Nonutility Subsidiaries 0.01 0.01 0.04 0.04
------- ------- ------- -------
$0.33 $0.28 $0.87 $0.83
======= ======= ======= =======
</TABLE>
Earnings per share increased by $0.05 and $0.04 for the three- and six-
month periods ended June 30, 1996, respectively, compared to the same
periods last year. The increases in both periods reflected higher revenues
due to the effect of favorable weather offset to a great extent by higher
expenses associated with the outage at Salem. The higher Salem expenses
reduced earnings for the three- and six-month periods by $0.03 and $0.12,
respectively. Refer to Note 4 to the Consolidated Financial Statements for
additional information concerning the Salem outage.
Operating results from the Conowingo District, which began in June 1995,
had a minimal impact on earnings, as expected.
STRATEGIC PLANS FOR COMPETITION
- -------------------------------
Wholesale (Resale) Business
- ---------------------------
In March 1996, Old Dominion Electric Cooperative (ODEC), the Company's
largest resale customer, issued a request for proposals that could
eventually replace ODEC's capacity and energy agreements with its current
suppliers, including a partial requirements agreement with the Company. On
July 1, 1996, the Company submitted its proposal to ODEC to provide all of
the load currently supplied by the Company. ODEC is expected to make a
decision in this matter in the fourth quarter of this year.
The Company has extended termination notice provisions with ODEC which
provide the Company with the opportunity to manage the financial impact of
any reduction in ODEC's load. The extended notice provisions require ODEC
to provide the Company with two years' notice for up to a 30% load
reduction and five years' notice for load reductions greater than 30%. To
date, ODEC has not given notice of its intent to terminate any portion of
service provided by the Company. Should any portion of the Company's
service to ODEC be reduced under the notice provisions, the Company's
revenues would not be impacted until late 1998 or 1999.
-13-
<PAGE>
In 1995, total revenues from ODEC represented 3.8% of the Company's total
sales revenues, and non-fuel (base rate) revenues from ODEC were
approximately $24 million. Should any portion of the Company's service to
ODEC be reduced, the decrease in non-fuel revenues would be partially
offset by transmission wheeling revenues and the avoidance of costs
associated with short-term capacity purchases which are expected to be made
in the future to supply a portion of ODEC's load.
Retail Business
- ---------------
In March and April 1996, the MPSC and DPSC, respectively, accepted the
Company's proposal to establish a forum to address changes in the
regulation of the electric utility industry. The Company's objective is to
work together with the Commissions and other interested parties in order to
develop a blueprint to move toward increased customer choice; i.e., the
ability of all retail customers to gain direct access to market-priced
electricity from the suppliers of their choice. The forum process will
address issues such as retail wheeling, stranded investment, rate redesign,
and alternative forms of regulation, such as performance-based regulation.
Forum participants are to submit reports to the DPSC and MPSC by December
31, 1996, describing the significant issues raised by allowing customer
choice and providing proposed solutions to those issues.
In June 1996, the Company sponsored a conference in which utility experts
addressed restructuring issues from a variety of perspectives. The
conference was attended by participants of both the Delaware and Maryland
forums. Meetings with forum participants in Delaware and Maryland are
ongoing.
ELECTRIC REVENUES AND SALES
- ---------------------------
Details of the changes in the various components of electric revenues are
shown below:
<TABLE>
<CAPTION>
Increase in Electric Revenues
From Comparable Period in Prior Year
--------------------------------------
(Dollars in Millions)
Three Six
Months Months
------ ------
<S> <C> <C>
Non-fuel (Base Rate) Revenues
Retail Sales Volume $19.2 $45.7
Resale Sales Volume 2.1 2.8
Fuel Revenues 7.4 16.0
Interchange Delivery Revenues 6.6 1.5
Other Operating Revenues 0.3 1.1
------ ------
Total $35.6 $67.1
====== ======
</TABLE>
-14-
<PAGE>
Non-fuel revenues from retail sales volume increased $19.2 million for the
three-month period and $45.7 million for the six-month period due to
increases in retail kilowatt-hour (kWh) sales of 12.4% and 14.0%,
respectively, which resulted largely from Conowingo District sales
beginning June 19, 1995. Excluding the Conowingo District, retail sales
increased 5.2% and 6.0% for the three- and six-month periods, respectively,
mainly due to the effect of favorable weather. Customer growth also
contributed to increased retail sales as the economy in the Company's
service territory remained strong. For the three-month period, excluding
the Conowingo District, billed sales to residential and commercial
customers increased 12.2% and 5.9%, respectively, while industrial sales
decreased 4.3%. For the six-month period, excluding the Conowingo
District, billed sales to residential and commercial customers increased
15.1% and 6.9%, respectively, while industrial sales decreased 3.7%. For
the three- and six-month periods, the decreases in industrial sales,
excluding the Conowingo District, were due to the temporary curtailment in
production by several large customers.
Non-fuel revenues from resale sales volume increased $2.1 million for the
three-month period and $2.8 million for the six-month period due to
increases in resale sales of 22.2% and 24.2%, respectively, resulting from
favorable weather and the Company providing its Delaware municipal
customers with a portion of their load that had been supplied by sources
other than the Company. Changes in resale sales have less of an impact on
non-fuel revenues than changes in retail sales, since average resale non-
fuel rates are significantly lower than average retail non-fuel rates.
Electric fuel costs billed to customers, or fuel revenues, 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 deferred until it is subsequently recovered from or returned to
utility customers. Fuel revenues increased $7.4 million and $16.0 million
for the three- and six-month periods, respectively, primarily due to higher
sales.
Interchange delivery revenues are reflected in the calculation of rates
charged to customers under fuel adjustment clauses and, thus, generally do
not affect net income. Interchange delivery revenues benefit customers by
reducing the effective cost of fuel billed to customers. Interchange
delivery revenues increased $6.6 million for the three-month period
primarily due to higher billing rates to the Pennsylvania-New Jersey-
Maryland Interconnection Association (PJM Interconnection).
GAS REVENUES, SALES, AND TRANSPORTATION
- ---------------------------------------
Total gas revenues increased $5.3 million for the six-month period because
of a $3.7 million increase in non-fuel revenues and a $1.6 million increase
in fuel revenues. Non-fuel and fuel revenues increased primarily due to a
12.0% increase in firm gas sales as a result of colder winter weather.
-15-
<PAGE>
ELECTRIC FUEL AND PURCHASED ENERGY EXPENSES
- -------------------------------------------
The components of the changes in electric fuel and purchased energy
expenses are shown in the table below:
<TABLE>
<CAPTION>
Increase (Decrease) in Electric Fuel and
Purchased Energy From Comparable Period in Prior Year
-----------------------------------------------------
(Dollars in Millions)
Three Six
Months Months
------ ------
<S> <C> <C>
Higher Average Cost of Electric
Fuel and Purchased Energy $14.5 $38.4
Increased kWh Output 8.9 12.4
Deferral of Fuel Costs (8.1) (27.7)
------ ------
Total $15.3 $23.1
====== ======
</TABLE>
For the three- and six-month periods, expenses increased $14.5 million and
$38.4 million, respectively, due to a higher average cost per kWh of
output, which primarily was due to higher gas and oil commodity prices and
the increased use of higher-priced purchased energy as a result of higher
demand coupled with the reduced availability or unavailability of certain
of the Company's generating units, including the Salem units.
Expenses increased $8.9 million and $12.4 million for the three- and six-
month periods, respectively, due to increased kWh output, which resulted
primarily from stronger sales demand.
Expenses decreased $8.1 million and $27.7 million for the three- and six-
month periods, respectively, due to variances in fuel costs deferred and
subsequently amortized under the Company's fuel adjustment clauses.
The kWh output required to serve load within the Company's service
territory is substantially equivalent to total output less interchange
deliveries. For the six months ended June 30, 1996, the Company's output
for load within its service territory was provided by 35% coal generation,
28% net purchased power, 27% oil and gas generation, and 10% nuclear
generation.
PURCHASED ELECTRIC CAPACITY
- ---------------------------
Purchased electric capacity increased $5.4 million and $14.2 million for
the three- and six-month periods, respectively, due to costs incurred
under a long-term contract with PECO, which was entered into concurrently
with the Company's purchase of COPCO.
-16-
<PAGE>
OPERATION, MAINTENANCE, AND DEPRECIATION EXPENSES
- -------------------------------------------------
Operation and maintenance expense increased $5.0 million for the three-
month period as a result of the following factors: $2.3 million related
to the Salem outage; $1.2 million related to the Conowingo District; and
$1.5 million of other costs.
Operation and maintenance expense increased $15.7 million for the six-month
period as a result of the following factors: $6.3 million related to the
Salem outage; $2.7 million related to the Conowingo District; and $6.7
million of other costs, which included higher maintenance costs at power
plants, other than Salem, associated primarily with the timing of plant
maintenance outages between periods. Total maintenance costs at these
plants for all of 1996 are expected to be in line with 1995 amounts.
Depreciation expense increased $3.6 million and $6.3 million for the three-
and six-month periods, respectively, primarily due to higher utility plant
balances including that of the Conowingo District.
UTILITY FINANCING COSTS--INTEREST EXPENSE
- -----------------------------------------
Interest expense increased $1.2 million and $3.6 million for the three-
and six-month periods, respectively, primarily due to the issuance of
long-term debt to acquire COPCO. For the three- and six-month periods,
increased interest expense from higher average short-term debt balances
was offset by decreased interest expense on deferred energy costs.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash provided by operating activities decreased $39.1 million for the
six months ended June 30, 1996, compared to the same period last year,
primarily due to the under-recovery of electric fuel and purchased energy
costs in the current six-month period, the over-recovery of electric fuel
and purchased energy costs in the prior six-month period, and changes in
accounts receivable balances. The under-recovery of electric fuel and
purchased energy costs in the current six-month period resulted from an
increase in these costs, including Salem replacement power costs, which
were not recovered from customers through existing fuel rates. Increased
fuel rates, subject to refund, went into effect in the Company's resale,
Virginia, and Maryland jurisdictions in May 1996, July 1996, and August
1996, respectively. Electric fuel rates in the Company's Delaware
jurisdiction are not expected to be increased until after the Company
files a proposal with the DPSC to address the recovery of Salem
replacement power costs. The Company plans to file its proposal with the
DPSC during the third quarter of 1996. For the current six-month period,
the Company used increased short-term borrowings to meet cash
requirements.
-17-
<PAGE>
For the six months ended June 30, 1996, utility construction expenditures
were $61 million compared to $55 million for the same period last year.
Internally generated funds (net cash provided by operating activities less
common and preferred dividends) provided 77% of the cash required for
construction for the current six-month period compared to 158% for the
prior six-month period.
During the third quarter of 1996, a wholly-owned trust of the Company
plans to issue up to $70 million of mandatorily redeemable preferred
securities. On a consolidated basis, the proceeds from the issuance will
be used to redeem or retire a portion of the Company's outstanding
preferred stock. This transaction will lower the after-tax cost of the
Company's total capital and is not expected to affect the Company's credit
rating.
RATIO OF EARNINGS TO FIXED CHARGES
- ----------------------------------
The Company's ratios of earnings to fixed charges under the Securities and
Exchange Commission (SEC) Method are shown below:
<TABLE>
<CAPTION>
12 Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
1996 1995 1994 1993 1992 1991
--------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(SEC Method)....................... 3.47 3.54 3.49 3.47 3.03 2.58
Ratio of Earnings to Fixed Charges
(SEC Method) as Adjusted........... 3.74 2.78
</TABLE>
Adjusted ratios exclude the following pre-tax amounts: for 1994, a $17.5
million early retirement charge and, for 1992, an $18.5 million gain from
the Company's share of the settlement of a lawsuit against PECO in
connection with the shutdown of Peach Bottom.
Under the SEC Method, earnings, including Allowance for Funds Used During
Construction (AFUDC), have been computed by adding income taxes and fixed
charges to net income. Fixed charges include gross interest expense and
the estimated interest component of rentals. 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.
-18-
<PAGE>
NONUTILITY SUBSIDIARIES
- -----------------------
Information on the Company's nonutility subsidiaries, in addition to the
following discussion, can be found in Note 7 to the Consolidated Financial
Statements.
Earnings per share of nonutility subsidiaries were $0.04 for the six-month
periods ended June 30, 1996 and 1995. For the current six-month period,
earnings were derived primarily from the recovery of previously written-off
joint venture assets. For the prior six-month period, earnings were
derived primarily from the recovery of previously written-off joint venture
assets and the receipt of an additional payment related to the sale of a
leveraged lease interest in a previous year.
-19-
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
- -------------------------
Power Outage
- ------------
As previously reported in Part II of the Company's Report on Form 10-Q for
the first quarter of 1996, at approximately 10:00 a.m. on May 14, 1996, the
Company experienced an equipment problem at a major interconnection
substation serving the Delmarva peninsula. As a result, electric service
was lost to approximately 300,000 customers, including customers served by
resale customers of the Company, in the southern part of Delaware and the
eastern shore of Maryland and Virginia. Electric service was restored
throughout the day with restoration of power completed by approximately
5:30 p.m. on May 14, 1996. Due to the outage, the Company has received
numerous claims. As of June 30, 1996, the Company had accrued a liability
for outage-related claims of $1 million--the amount for which the Company
is self-insured. The Company has insurance coverage for total claims
exceeding $1 million.
Salem Nuclear Generating Station
- --------------------------------
Refer to Note 4 to the Consolidated Financial Statements for an update on
the complaints filed by the Company against PSE&G and Westinghouse related
to Salem.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At its Annual Meeting held on May 30, 1996, the Company submitted for a
vote of security holders an amendment to the Company's Restated Certificate
and Articles of Incorporation removing the limits on the Company's
unsecured indebtedness. Prior to such amendment, the Company was
restricted in the amount of unsecured indebtedness it could issue or
assume, to 20% of the aggregate of its secured debt, preferred stock and
common shareholder equity. If approved by the affirmative vote of a
majority of the holders of the Common Stock entitled to vote and a majority
of the total voting power of the Preferred Stock and Preferred Stock--$25
Par (voting as a single class), the amendment would remove this 20%
unsecured debt limitation. This proposal was approved by the Company's
security holders, as follows: out of 60,754,568 shares of Common Stock
outstanding on the record date for the Annual Meeting, 39,151,942 shares
were voted FOR the proposal, 3,545,168 shares were voted AGAINST the
proposal, 1,213,083 shares were voted to ABSTAIN, and 16,844,375 shares did
not vote; out of 1,680,850 total votes available for the Preferred Stock
and Preferred Stock--$25 Par (each share of which is allowed 1/4 vote and,
thus, 1,600,000 outstanding shares were counted as 400,000 votes) on the
record date for the Annual Meeting, 873,000 votes were cast FOR the
proposal, 257,343 votes were cast AGAINST the proposal, 41,621 votes were
cast to ABSTAIN, and 508,886 available votes were not cast.
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<PAGE>
The Company also submitted for a vote of the holders of its Common Stock at
such Annual Meeting an amendment and extension of the Company's Long-Term
Incentive Plan. This Plan, originally approved by the holders of the
Company's Common Stock in 1987, had a ten-year period and provided for the
issuance of up to 750,000 shares of Common Stock under the Plan. The
amendment and extension extended the term of the Plan for an additional ten
years and provided for the issuance of up to 1.5 million additional shares
of Common Stock thereunder. The amendments to the Plan, for the most part,
removed some of the specific conditions for the awards under the Plan and
gave more discretion to the Company's Compensation Committee of the Board
of Directors. The affirmative vote of the holders of a majority of the
shares of the Common Stock entitled to vote was required for the adoption
of this proposal. This proposal was approved by the holders of the Common
Stock, as follows: out of 60,754,568 shares outstanding on the record date
for the Annual Meeting, 45,398,194 shares were voted FOR the proposal,
4,548,693 were voted AGAINST the proposal, 1,053,856 were voted to ABSTAIN,
and 9,753,825 shares did not vote.
Item 5. Other Information
- -------------------------
Pending Merger with Atlantic Energy, Inc.
- -----------------------------------------
Refer to Note 3 to the Consolidated Financial Statements for information
regarding an Agreement and Plan of Merger with Atlantic Energy, Inc.
Salem Nuclear Generating Station
- --------------------------------
Refer to Note 4 to the Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
for an update on matters concerning the current Salem outage.
Spent Nuclear Fuel Disposal
- ---------------------------
The following is an update to matters disclosed in the Company's 1995
Annual Report on Form 10-K under "Fuel Supply for Electric Generation--
Nuclear." In a decision issued July 23, 1996, the Court of Appeals for the
District of Columbia Circuit found that the United States Department of
Energy (DOE) is obligated to begin accepting spent nuclear fuel for
disposal no later than January 31, 1998. The Company cannot predict when
or if the DOE will accept nuclear fuel as no repository or other storage
facility currently exists or is under construction.
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<PAGE>
PJM Interconnection Filing with FERC
- ------------------------------------
The following is an update to matters disclosed in the Company's 1995
Annual Report on Form 10-K under "Electric Operations -- Power Pool." On
July 24, 1996, seven PJM Interconnection member companies, including the
Company, filed a detailed plan with the Federal Energy Regulatory
Commission (FERC) to restructure the PJM Interconnection in compliance with
FERC Order No. 888, which is intended to promote wholesale competition by
requiring utilities to provide open access to their transmission systems.
The companies plan to implement the restructured power pool by the end of
1996 if approved by the FERC. The plan includes the following key
elements:
- - Pool-wide transmission tariffs providing comparable, open-access service
for all wholesale transactions throughout the PJM Interconnection;
- - A regional pool energy market using price-based dispatch that is open to
all eligible wholesale buyers and sellers of power;
- - Establishment of an Independent System Operator (ISO) to provide daily
management and administration of pool operations, the energy market, and
the regional transmission network; and
- - Development of an enhanced pool-wide planning function consistent with
Mid-Atlantic Area Coordination principles, criteria and procedures,
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.
The Company cannot predict what action the FERC will take regarding this
filing.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits
- --------
Exhibit 2, Agreement and Plan of Merger dated as of August 9, 1996, by and
among the Company, Atlantic Energy, Inc., DS, Inc., and DS Sub, Inc.
(filed with Form 8-K on August 14, 1996, and incorporated herein by
reference pursuant to Rules 12b-23 and 12b-32).
Exhibit 12, Computation of Ratio of Earnings to Fixed Charges.
Exhibit 27, Financial Data Schedule.
Reports on Form 8-K
- -------------------
A Report on Form 8-K dated May 29, 1996, updating matters related to Salem
Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated July 23, 1996, updating matters related to
Salem Units 1 and 2 previously reported, was filed with the Commission.
A Report on Form 8-K dated August 9, 1996, providing information regarding
an Agreement and Plan of Merger with Atlantic Energy, Inc., was filed with
the Commission on August 14, 1996.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Delmarva Power & Light Company
------------------------------
(Registrant)
Date: August 14, 1996 /s/ B. S. Graham
--------------- --------------------------------------
B. S. Graham, Senior Vice President,
Treasurer, and Chief Financial Officer
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 9, 1996
----------------------
DELMARVA POWER & LIGHT COMPANY
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware and Virginia I-1405 51-0084283
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
- --------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 302-429-3448
------------
None
--------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
-1-
<PAGE>
Item 5. Other Events
- --------------------
MERGER AGREEMENT WITH ATLANTIC ENERGY, INC.
Delmarva Power & Light Company, a Delaware and Virginia Corporation
headquartered in Wilmington, Delaware ("Delmarva"), and Atlantic Energy,
Inc., a New Jersey corporation headquartered in Egg Harbor Township, New
Jersey ("AE"), DS, Inc., a Delaware corporation which has been newly formed
to accomplish this transaction ("Newco"), and DS Sub, Inc., a newly-formed
Delaware corporation and a wholly-owned subsidiary of Newco ("Sub"), have
entered into an Agreement and Plan of Merger, dated as of August 9, 1996
(the "Merger Agreement"), which provides for a business combination of
Delmarva and AE as peer firms in a merger of equals (the "Transaction").
The outstanding stock of Newco is owned 50% by Delmarva and 50% by AE. The
Transaction, which was approved unanimously by the Boards of Directors of
Delmarva and AE on August 9, 1996, is expected to close shortly after all
of the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived. The
regulatory approval process is expected to take approximately 12 to 18
months.
As a result of the Transaction, Newco will become the holding company
of the combined enterprise and will be registered under the Public Utility
Holding Company Act of 1935, as amended. The name of Newco will be changed
at a later date as agreed upon by the Boards of Directors of Delmarva and
AE. Newco will be the parent company of both Delmarva and Atlantic City
Electric Company ("Atlantic Electric"), which currently is AE's regulated
utility subsidiary.
The Merger Agreement and the joint press release issued in connection
therewith are filed as exhibits hereto and are incorporated herein by
reference. The description of the Merger Agreement set forth herein does
not purport to be complete and is qualified in its entirety by the
provisions of the Merger Agreement.
Under the terms of the Merger Agreement the following will occur
simultaneously: (1) Sub will be merged with and into Delmarva, and shares
of Delmarva's common stock, par value $2.25 per share ("Delmarva Common
Stock"), will be exchanged for shares of Newco's common stock, par value
$.01 per share ("Newco Common Stock"), with Delmarva the surviving
corporation in the merger (the "Delmarva Merger"); and (2) AE will be
merged with and into Newco, and AE's shares of common stock, no par value
("AE Common Stock"), will be exchanged for shares of Newco Common Stock and
Newco's Class A Common Stock, par value $.01 per share (the "Class A
Stock"), with Newco being the surviving corporation in the merger (the
"Atlantic Merger"). As a result of the foregoing mergers, Newco will be
the parent of Delmarva and its subsidiaries, of Atlantic Electric and of
AE's other subsidiaries.
Delmarva stockholders will receive one share of Newco Common Stock for
each share of Delmarva Common Stock they hold immediately prior to the
Transaction. AE stockholders will receive .75 shares of Newco Common Stock
and 0.125 shares of Class A Stock for each share of AE Common Stock they
hold immediately prior to the Transaction. As of June 30, 1996, Delmarva
had outstanding 60,697,635 shares of common stock and AE had outstanding
-2-
<PAGE>
52,702,052 shares of common stock. Delmarva's outstanding Preferred Stock
and Preferred Stock--$25 Par will be unchanged and remain outstanding after
the Transaction. The Preferred Stock of Atlantic Electric also will be
unchanged and remain outstanding after the Transaction.
The Class A Stock is intended to reflect the growth prospects and
regulatory environment of Atlantic Electric, AE's regulated electric
utility business. When the Transaction is consummated, the shares of Class
A Stock received by AE's stockholders will represent, in aggregate, a 30%
interest in any earnings of Atlantic Electric (regulated electric utility
business only) in excess of $40 million per year. The first $40 million of
earnings of Atlantic Electric and the remaining 70% of Atlantic Electric's
earnings in excess of $40 million after adding back goodwill, as well as
all of Newco's earnings not attributable to Atlantic Electric's electric
utility business, will be for the benefit of Newco's stockholders. See
Exhibit A--Form of Certificate of Incorporation of Newco, which is attached
to the Merger Agreement, for the terms, conditions and designations of the
Class A Stock.
It is anticipated that the initial annual dividend for the Newco
Common Stock would be $1.54 (the same annual dividend as currently paid by
both Delmarva and AE on their respective shares of common stock). The
Merger Agreement provides that, subject to declaration by the Board of
Directors of Newco and the obligation of such Board to react to Newco's
financial condition, regulatory environment and results of operations, the
annual dividend on the Class A Stock will be $3.20 ($.40 for each .125
share received in the exchange) per share per annum until the earlier of
July 1, 2001, or the end of the 12th calendar quarter following the
calendar quarter in which the Transaction is consummated (the "Initial
Period"). Thereafter, Newco intends, subject to declaration by the Board
of Directors of Newco and the obligation of such Board to react to Newco's
financial condition, regulatory environment and results of operations, to
pay annual dividends on the Class A Common Stock at a rate equal to 90% of
earnings in excess of $40 million attributable to Atlantic Electric's
regulated utility business; provided that if and to the extent the annual
dividends paid on the Class A Stock during the Initial Period exceed 100%
of earnings in excess of $40 million attributable to such business during
such period, Newco's Board of Directors may consider this fact in
determining the appropriate annual dividend rate on the Class A Stock
thereafter.
A preliminary estimate indicates that the Transaction will result in
net savings in excess of $500 million in costs over a 10-year period. The
allocation of net savings between the ratepayers of Newco's utility
subsidiaries and the stockholders of Newco will be determined by various
regulatory agencies.
The Transaction is subject to customary closing conditions, including,
without limitation: (a) the receipt of required stockholder approvals of
Delmarva and AE; (b) the making of all necessary filings with, and receipt
of all requisite approvals from, governmental authorities, including the
approvals of the utility regulators in Delaware, New Jersey and Virginia,
the approval of the Federal Energy Regulatory Commission, the Nuclear
Regulatory Commission and the Securities and Exchange Commission, and the
filing of the requisite notification with the Federal Trade Commission and
the Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of the applicable
waiting periods
-3-
<PAGE>
thereunder; and (c) the receipt of opinions of counsel to
the effect that, under the Internal Revenue Code, the Delmarva Merger,
taken together with the Atlantic Merger, will be treated as a tax-free
exchange and that the Atlantic Merger will be treated as a reorganization.
It is expected that stockholder meetings to approve the Transaction will be
held in early 1997.
The Merger Agreement contains certain covenants restricting the
conduct of Delmarva's and AE's respective businesses during the period
between execution of the Merger Agreement and consummation of the
Transaction. Generally, the parties: must conduct their businesses in the
ordinary course consistent with past practice; may not increase dividends
beyond specified levels; may not issue any capital stock beyond certain
limits; may not amend their charters or bylaws in a manner adverse to the
other party; may not make acquisitions, dispositions or capital
expenditures nor incur debt beyond certain limits; may not discharge or
satisfy liabilities nor change any material contracts except in the
ordinary course of business; and may not make any changes affecting their
accounting rules, the tax-free status of the Transaction or the tax-exempt
status of any of their tax-exempt bonds. Additionally, the parties agreed
to discuss with each other any changes in rates or charges, standards of
service or accounting with respect to regulated utility operations, and
agreed not to make any filings to change rates or charges if doing so would
have a material adverse effect on the benefits associated with the
Transaction. AE also agreed to terminate its retirement plan for
nonemployee directors, and not to make any changes in its or Atlantic
Electric's utility status under the Public Utility Holding Company Act of
1935, as amended.
The Merger Agreement provides that, after consummation of the
Transaction, Newco will be headquartered in Wilmington, Delaware, with
significant presence in New Jersey. The Merger Agreement provides that
Delmarva may nominate 10 directors to the initial post-Transaction Board of
Directors of Newco, that AE may nominate 8 directors to the initial post-
Transaction Board, and that all directors of Delmarva and AE serving
immediately prior to consummation of the Transaction will be offered
positions on the Newco Board. Mr. Howard E. Cosgrove, the current Chairman
of the Board, President and Chief Executive Officer ("CEO") of Delmarva,
will serve as Chairman of the Board and CEO of Newco. Mr. Jerrold L.
Jacobs, the current Chairman of the Board and CEO of AE, will serve as
Vice-Chairman of the Board of Newco until the second anniversary of the
consummation of the Transaction. Mr. Michael J. Chesser, the current
President and Chief Operating Officer ("COO") of AE, will serve as
President and COO of Newco.
The Merger Agreement may be terminated under certain circumstances,
including: (1) by mutual consent of the Boards of Directors of Delmarva
and AE; (2) by Delmarva or AE if the Transaction is not consummated on or
before 18 months from signing of the Merger Agreement (subject to automatic
extension to 30 months from signing if, on or before 18 months from
signing, all of the statutory approvals have not been obtained and all
other conditions to closing of the Transaction then are capable of being
satisfied); (3) by Delmarva or AE if approval of the Transaction by either
Delmarva or AE stockholders is not obtained; (4) by Delmarva or AE if any
state or federal law, rule or regulation or court order prohibits the
Transaction; (5) by Delmarva or AE on five days' prior notice if its Board
of Directors determines in good faith on the basis of a written opinion of
outside counsel that the acceptance of an acquisition proposal by a third
party is
-4-
<PAGE>
necessary for such Board of Directors to act consistent with its
fiduciary duties, after the other party has first been given an opportunity
to negotiate and make adjustments in the terms of the Merger Agreement;
(6) by one party if there exists a material breach by the other party of
any representation, warranty, covenant or agreement, which breach is not
remedied within 20 days after receipt of notice by the nonbreaching party;
(7) by either party if the Board of Directors of the other party shall
withdraw or adversely modify its recommendation of the Transaction, fail to
reaffirm such recommendation, approve any third party acquisition proposal,
or resolve to take any of the aforesaid actions; and (8) by either party if
(A) a third party acquires more than 50% of the voting power of the
outstanding securities of the other party, or (B) a majority of the members
of the Board of Directors of the other party as of the signing of the
Merger Agreement (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
such other party was approved by a vote of a majority of the directors of
such other party then still in office who are either directors as of the
date of the Merger Agreement or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors of such other party then in office.
The Merger Agreement provides that if it is terminated pursuant to the
provisions described in clauses (5), (6), (7) or (8) of the preceding
paragraph, the breaching party or the party whose board has terminated on
the basis of its fiduciary duties or changed its recommendation or whose
voting stock has been acquired or whose board has changed shall pay to the
other party out-of-pocket expenses and fees incurred in connection with the
Transaction up to $10 million ("Out-of-Pocket Expenses"); provided that in
the event of a willful breach by the other party, the terminating party may
in addition pursue any remedies available to it under law or equity. In
addition, if the Merger Agreement is terminated pursuant to the provisions
described in clause (2), (3), (5), (6) or (7) of the preceding paragraph or
as a result of a breach of the requirement to seek stockholder approval and
at the time of such termination a third party acquisition proposal is
outstanding for Delmarva or AE (as the case may be, the "Target Party") and
such third party offer is consummated or accepted by the Target party or
the Target Party or any of its affiliates becomes a subsidiary of the
offeror or enters into a written agreement to consummate such transaction,
in any case within 2 1/2 years after the termination, the Target Party must
pay the other party $30 million plus Out-of-Pocket Expenses. If the Merger
Agreement is terminated pursuant to the provisions described in clause (8)
of the preceding paragraph, the nonterminating party must pay the other
party $30 million plus Out-of-Pocket Expenses. Notwithstanding the
foregoing, the total amount of fees payable by Delmarva or AE upon
termination of the Merger Agreement shall not exceed $40 million, including
Out-of-Pocket Expenses.
Delmarva recognizes that the divestiture of its existing gas
operations and certain nonutility operations is a possibility under the new
registered holding company structure, but Delmarva will seek approval from
the SEC to maintain such businesses. If divestiture is ultimately
required, the SEC historically has allowed companies sufficient time to
accomplish divestitures in a manner that protects stockholder value.
-5-
<PAGE>
The information set forth above includes forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements reflect numerous assumptions
and involve a number of risks and uncertainties. Among the factors that
could cause actual results to differ materially from those set forth above
are: electric load and customer growth; abnormal weather conditions,
available sources and cost of fuel and generating capacity; the speed and
degree to which competition enters the power generation, wholesale and
retail sectors of the electric utility industry; state and federal
regulatory initiatives that increase competition, threaten cost and
investment recovery and impact rate structures; the ability of Newco to
reduce successfully its cost structure; operating performance of the
nuclear generating facilities, decommissioning costs associated with such
facilities and impact on future operational and financial condition
associated with the uncertain status of the Salem Nuclear Generating
Station; the degree to which Newco develops non-regulated business
ventures; the economic climate and growth in the service territories of
Delmarva and Atlantic Electric following the Transaction; economies
generated by the Transaction; inflationary trends and interest rates and
other risks detailed from to time in the reports filed with the Securities
and Exchange Commission by Delmarva and AE.
Item 7. Financial Statements and Exhibits
- -----------------------------------------
(c) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
2 Agreement and Plan of Merger dated as of
August 9, 1996, by and among Delmarva Power
& Light Company, Atlantic Energy, Inc., DS,
Inc. and DS Sub, Inc.
99 Joint press release, dated August 12, 1996,
of Delmarva Power & Light Company and
Atlantic Energy, Inc.
As part of Exhibit No. 2 to this report, Delmarva is filing Exhibit
A--Form of Certificate of Incorporation of Newco. Pursuant to Item
601(b)(2) of Regulation S-K, Delmarva is not filing any other attachments
or schedules to the Merger Agreement as part of the Exhibit No. 2, but is
providing the following list of such attachments and schedules as required
by such Item:
Exhibit B--Form of Bylaws of Newco
Exhibit C--Form of Affiliate Agreement (regarding the obligations of
affiliates pursuant to Rule 144 under the Securities Act of
1933, as amended)
Delmarva agrees to furnish supplementally to the Commission, upon
request, a copy of any omitted attachments or schedules.
-6-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Delmarva Power & Light Company
------------------------------
(Registrant)
Date: August 14, 1996 /s/DALE G. STOODLEY
------------------------------
Dale G. Stoodley
Vice President and
General Counsel
-7-
