FPL Group
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Entergy
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ENTERGY AND FPL GROUP AGREE TO A $27 BILLION MERGER OF EQUALS
CREATING THE NATION'S LARGEST POWER COMPANY
The New Company, With More Than 48,000 MW of Generating Capacity,
Will Serve 6.3 Million Customers
Juno Beach, FL and New Orleans, LA (July 31, 2000) -- FPL Group, Inc. (NYSE:
FPL) and Entergy Corporation (NYSE: ETR) today announced they have agreed to
combine in a merger of equals, creating the largest power company in the
nation.
The new company, which will be named at a later date, will be the largest U.S.
electric utility and the largest power producer. Based on the closing stock
prices of both companies on Friday, July 28, 2000, the combined company will
have a total enterprise value of more than $27 billion, ($16.4 billion in
equity market capitalization and $10.7 billion in debt and preferred stock).
The new company will combine and leverage strategically positioned assets to
create a premier energy company. The company will have a strong market
position in wholesale generation, trading, marketing and transportation.
Under the terms of the agreement, which was approved unanimously by the boards
of directors of both companies, each holder of FPL Group common stock will
receive 1.00 share of the new holding company for each share of FPL Group
common stock, and each holder of Entergy common stock will receive 0.585 of a
share of the new holding company for each share of Entergy common stock, in a
tax-free, stock-for-stock exchange. The transaction will be immediately
accretive to both companies, based on consensus security analysts' earnings
estimates. Average annual earnings per share growth for the combined company
is expected to be ten percent or more.
FPL Group and Entergy have authorized share repurchase programs totaling $1
billion to be implemented prior to the close of the merger. The programs ($570
million at FPL Group and $430 million at Entergy) include remaining
authorizations from the companies' existing share repurchase programs.
The newly combined company expects to pay a dividend that is consistent with
FPL Group's current dividend policy. Based on FPL Group's current annual
dividend of $2.16 per share, Entergy's shareholders would receive $1.26 per
share on an as-converted basis compared to Entergy's current dividend of $1.20
per share.
The merger combines two high performance cultures to create a company that
will be ranked the:
o #1 electric utility serving more than 6.3 million customers
o #1 power producer with a generating capacity of more than 48,000
megawatts
o #2 nuclear power generator with more than 10,000 megawatts
o #2 among utilities in market capitalization at $16.4 billion
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The combined company will be one of the nation's largest independent power
producers with nearly 10,000 net megawatts of unregulated generating capacity.
Also, through Entergy's pending venture with Koch Industries, the combined
company will be one of the largest U.S. marketers of both electric power and
natural gas, will own 10,000 miles of strategic natural gas pipeline assets,
and will be the world market leader in weather derivatives.
In addition to becoming one of the largest energy organizations, the new
company will be a top performer on a number of operational criteria. Florida
Power & Light, the principal subsidiary of FPL Group, has long achieved
customer service ratings in the top 10 percent of the industry, and an
independent study published in April ranked Entergy first among all U.S.
electric utilities for year-over-year improvement in customer satisfaction.
The combined electric generation fleet will be an environmental leader, with
emission rates among the lowest of all U.S. generating companies. It will also
be one of the most efficient, with operating costs among the lowest in the
industry. The new company will be the U.S. leader in natural gas generating
capacity - and the nation's largest user of natural gas.
Benefits of the Transaction
Earnings Growth "We are creating a company with the scope and scale to prosper
in the changing industry marketplace," said James L. Broadhead, chairman and
chief executive officer of FPL Group, Inc. "We expect to deliver average
annual earnings per share growth of ten percent or more over the next several
years fueled by a combination of revenue enhancement opportunities and cost
savings. Our strong balance sheet and increased cash flows will enable our new
company to more aggressively pursue profitable growth opportunities."
Strategic Fit "The merger combines two strategically aligned, financially
healthy companies into an organization that has no equal in the industry,"
said J. Wayne Leonard, chief executive officer of Entergy Corporation. "We
both have divested non-core businesses and are focusing on enhancing our
utility operations. At the same time, we are rapidly growing our wholesale
generation businesses with an emphasis on clean energy from nuclear, natural
gas, and renewable energy sources. The Entergy-Koch venture brings premier
trading and risk management skills and creates the potential to link our
industry-leading gas positions through the Gateway Pipeline. Combining our
assets and skills will not only enhance our ability to achieve these strategic
goals, but will also create the opportunity to move to a new level as a
leading energy company."
Benefits to Customers "FPL has demonstrated consistent year-over-year
improvement in key performance and customer satisfaction measures and is an
industry leader in plant operations, customer service and system reliability,"
said Mr. Leonard. "Over the past two years, our employees at Entergy have
dramatically improved our service quality as well. When we combine best
practices, we expect to further enhance the level of service provided by both
companies. Stakeholders can count on our new company to carry on the values
shared by both Entergy and FPL Group: safety as our highest priority, quality
service, environmental responsibility and good corporate citizenship."
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Competitive Strength. Mr. Broadhead said, "In addition to strengthening our
utility operations, we will be creating one of the largest, most financially
sound, and fastest growing wholesale generating companies, with all the
critical capabilities in place to ensure even greater success. By combining
our premier operating skills, solid project development expertise and vast
energy marketing and trading resources, we expect to accelerate our growth and
to maximize the value of our portfolio.
"Through its pending ventures with other industry leaders such as Koch
Industries and The Shaw Group, Entergy has taken an innovative approach to add
to its capabilities and to expand its growth opportunities," said Mr.
Broadhead. "We would expect these partnerships to provide added benefit to our
combined company as we grow our wholesale generation portfolio."
Strategic Outlook of the New Company
The new company will carry out the closely aligned business strategies of FPL
Group and Entergy, which are based on strong core utility operations and
growth in wholesale energy markets, primarily in clean, low-cost electric
generation. It will pursue additional growth through development of electric,
natural gas, weather and telecommunications products and services for a large
and diverse customer base.
Utility Operations
The regulated utility business within the merged company will serve more than
6.3 million customers through its affiliates Florida Power & Light, Entergy
Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi and
Entergy New Orleans. The super-regional utility will own and operate 38,400
megawatts of capacity. It will be the largest operator of gas-fired power
plants and the largest buyer of natural gas and residual fuel oil in the
country.
Through concerted efforts to reduce costs and improve service, the combined
company expects to effectively compete in any market environment. As
unregulated retail opportunities continue to expand, the combined company will
be well positioned to leverage its superior scale and scope through deploying
e-commerce applications for customer aggregation, transactions and billing.
Nuclear Operations
The combined company will be a premier national nuclear company, a strategic
goal adopted by Entergy in 1998. It will be the second-largest nuclear
generator in the country, with more than 10,000 megawatts of utility and
competitive nuclear capacity at eight Entergy units - including two units on
which Entergy expects to complete purchase later this year - and four FPL
Group units.
The new company expects to leverage its combined nuclear expertise and
experience - including efficient plant operations, turnaround of
underperforming units, acquisitions, decommissioning, and license extension -
to capitalize on opportunities in the consolidating nuclear industry. The
merger will combine FPL Group's nuclear units, recognized as some of the
best-run plants in the country, with Entergy's growing fleet.
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For 1997-1999, Entergy's and FPL Group's nuclear units achieved a combined
capacity factor of 10 percentage points above the industry average. Bringing
together the companies' nuclear generation operations will enhance the ability
to manage risk, serve customers and leverage the talent and resources in the
two organizations across nuclear operations in the company's regulated utility
businesses and competitive generation markets.
Wholesale Operations
By combining both companies' wholesale operations, the merged company expects
to more aggressively grow its portfolio and capture more value from its
assets. The two companies have almost 10,000 megawatts of non-utility
generating capacity today and, after the merger, we plan to grow to more than
30,000 megawatts by 2004.
Several factors that will enable the combined company to profitably grow its
wholesale generation business include:
o World class operating skills;
o Strong, proven development teams;
o Scale and scope to execute projects more quickly;
o 76 gas turbines under contract with General Electric for
delivery through 2005;
o A venture with The Shaw Group, which is expected to close soon, to
accelerate construction and reduce costs of new projects;
o A soon-to-be-completed venture with Koch Industries to fully
leverage its current and future portfolio, manage risks and to
capitalize on new markets such as weather derivatives.
These integrated wholesale capabilities - from trading and risk management to
origination to development to asset financing and management will allow the
combined company to create and capture more value from existing assets and to
deploy more capital-efficient strategies.
Energy Marketing & Trading
Once merged, Entergy and FPL Group will benefit from one of the largest energy
marketing and trading operations in the country. Later this year, Entergy
expects to close its previously announced agreement with Koch Industries under
which the companies agreed to form Entergy-Koch L.P., which is expected to
rank among the nation's top 10 energy commodity traders in terms of combined
volumes of electricity and natural gas. Entergy-Koch is expected to trade more
than 100 million megawatts/year and to create a significant marketing platform
to sell the company's wholesale generation. It also will procure more than 7-8
billion cubic feet of gas per day for the combined company. The venture also
includes Koch's Gateway natural gas pipeline, a 10,000-mile system serving the
Gulf South region.
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The combined company expects its trading organization to enhance its utility
and wholesale operations, as well as develop new products, such as Koch's
innovative weather derivatives, to generate additional revenue opportunities.
The combined company will also offer the opportunity for expansion of the
Gateway pipeline into the growing Florida market.
Telecommunications
The new company also will operate a wholly owned subsidiary, FPL FiberNet,
offering fiber optic capacity in Florida on a wholesale basis. Formed in
January 2000, the company operates a 1,600-route mile fiber optic network in
Florida and is building intra-city networks to serve Florida's top 15
metropolitan markets. Through agreements with other providers, it offers an
8,500-route mile network throughout the fast-growing Southeast market.
FPL FiberNet will add to its existing 45,000-fiber mile system to reach
approximately 500,000 fiber-miles within the next few years in order to meet
the exploding demand for fiber capacity in Florida and connections to Latin
America. The combination with Entergy provides additional telecommunications
opportunities in Entergy's traditional service territory.
Transaction Details
Based on the number of common shares currently outstanding, FPL Group
shareholders will own 57 percent of the common equity of the combined company,
and Entergy shareholders will own 43 percent.
The combined company expects the merger will provide annual synergies growing
from $150 million to $275 million over the first few years after closing. Of
the total, the regulated businesses should realize annual cost savings of $110
million to $150 million, derived from eliminating duplicate corporate and
administrative positions and programs, as well as procurement economies. The
competitive businesses expect annual cost savings and revenue enhancements of
$40 million to $125 million. Additionally, the competitive businesses expect
to realize annual capital expenditure savings of $50 million to $100 million.
The companies will seek to minimize workforce effects of the merger through a
variety of efforts. All union contracts will be honored.
Mr. Broadhead will serve as chairman of the combined company, and Mr. Leonard
will become president and chief executive officer. The new company's board of
directors, which will include both Mr. Broadhead and Mr. Leonard, will
initially consist of 15 members, eight from FPL Group and seven from Entergy.
The merged company will locate its corporate headquarters in Juno Beach, FL
and will have its Utility Group headquarters in New Orleans. Each of the
company's six utilities will continue to maintain its headquarters at its
present location.
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The merger requires the approval of shareholders of both companies, the
Securities and Exchange Commission, the Federal Energy Regulatory Commission,
the Nuclear Regulatory Commission, and the Federal Communications Commission;
the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act; and the completion of regulatory
procedures in Arkansas, Florida, Louisiana, Mississippi, Texas and the city of
New Orleans. The companies' objective is to complete the transaction within 15
months.
Merrill Lynch & Co., Inc. acted as financial advisor to FPL Group. Morgan
Stanley Dean Witter and J.P. Morgan & Co. Incorporated acted as financial
advisors to Entergy. Cravath, Swaine and Moore acted as legal counsel to FPL
Group. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel to
Entergy.
Company Information
FPL Group, with annual revenues of more than $6 billion, is one of the
nation's largest providers of electricity-related services with a generating
capacity of more than 20,000 megawatts. Its principal subsidiary, Florida
Power & Light, serves 3.8 million customer accounts in Florida. FPL Group
employs 11,350 employees and operates in 17 states. FPL Energy, LLC, FPL
Group's independent power production subsidiary, is a leader in generating
electricity from clean and renewable fuels. Information is available on the
Internet at www.fplgroup.com.
Entergy Corporation, with annual revenues of nearly $9 billion, is a major
global energy company engaged in power production, distribution operations,
and related diversified services, with more than 12,200 employees. It is also
a leading provider of wholesale energy marketing and trading services. Entergy
owns, manages or invests in power plants generating nearly 30,000 megawatts of
electricity domestically and internationally and delivers electricity to about
2.5 million customers in portions of Arkansas, Louisiana, Mississippi and
Texas. Information is available on the Internet at www.entergy.com.
Information on Entergy's venture partners: Koch Industries Inc., the
second-largest privately held company and one of the most successful energy
traders in the United States, is involved in virtually all phases of the oil
and gas industry, as well as in chemicals, plastics, energy services, chemical
and environmental technology products, asphalt products, metals and mineral
services, ranching, financial services, and ventures. The Shaw Group Inc., the
world's leading innovator of turnkey piping solutions and provider of erection
services, has experience in the construction of over 200,000 megawatts of
electric generation worldwide.
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains forward looking statements within the meaning of
the "safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
forward-looking statements with respect to revenues, earnings, performance,
strategies, prospects and other aspects of the businesses of FPL Group, Inc.
and Entergy Corporation are based on current expectations that are subject to
risk and uncertainties. A number of factors could cause actual results or
outcomes to differ materially from those indicated by such forward looking
statements. These factors include, but are not limited to, risks and
uncertainties relating to: changes in laws or regulations, changing
governmental policies and regulatory actions with respect to allowed rates of
return including but not limited to return on equity and equity ratio limits,
industry and rate structure, operation of nuclear power facilities,
acquisition, disposal, depreciation and amortization of assets and facilities,
operation and construction of plant facilities, recovery of fuel and purchased
power costs, decommissioning costs, present or prospective wholesale and
retail competition (included but not limited to retail wheeling and
transmission costs), political and economic risks, changes in and compliance
with environmental and safety laws and policies, weather conditions (including
natural disasters such as hurricanes), population growth rates and demographic
patterns, competition for retail and wholesale customers, availability,
pricing and transportation of fuel and other energy commodities, market demand
for energy from plants or facilities, changes in tax rates or policies or in
rates of inflation or in accounting standards, unanticipated delays or changes
in costs for capital projects, unanticipated changes in operating expenses and
capital expenditures, capital market conditions, competition for new energy
development opportunities and legal and administrative proceedings (whether
civil, such as environmental, or criminal) and settlements and other factors.
Readers are referred to FPL Group, Inc.'s and Entergy Corporation's most
recent reports filed with the Securities and Exchange Commission.
Additional Information and Where to Find It
In connection with the proposed merger, FPL Group, Inc. and Entergy
Corporation will file a joint proxy statement / prospectus with the Securities
and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ
THE JOINT PROXY STATEMENT / PROSPECTUS WHEN IT BECOMES AVAILABLE, BECAUSE IT
WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain
a free copy of the joint proxy statement / prospectus (when available) and
other documents filed by FPL Group, Inc. and Entergy Corporation with the
Commission at the Commission's web site at http://www.sec.gov. Free copies of
the joint proxy statement / prospectus, once available, and each company's
other filings with the Commission may also be obtained from the respective
companies. Free copies of FPL Group's filings may be obtained by directing a
request to FPL Group, Inc., 700 Universe Blvd., P.O. Box 14000, Juno Beach, FL
33408-0420, Telephone: (561) 694-4000. Free copies of Entergy's filings may be
obtained by directing a request to Entergy Corporation, 639 Loyola Avenue, New
Orleans, Louisiana 70113, Telephone: (514) 576-4000.
Participants in Solicitation
FPL Group, Inc., Entergy Corporation and their respective directors, executive
officers and other members of their management and employees may be soliciting
proxies from their respective stockholders in favor of the merger. Information
concerning FPL Group's participants in the solicitation is set forth in FPL
Group's Current Report on Form 8-K filed with the Commission on July 31, 2000,
and information concerning Entergy's participants in the solicitation is set
forth in Entergy's Current Report on Form 8-K filed with the Commission on
July 31, 2000.
# # #
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Press Teleconference Information:
Note to Editors: There will be a press teleconference on Monday, July 31, 2000
at 12:00 pm (Eastern time). The dial in number is (888) 243-1681 (within the
U.S.) and (212) 993-0207 (internationally). You can visit FPL Group and
Entergy merger web site at: www.dealinfo.com/fplgroup-entergy.
Satellite Uplink for FPL Group and Entergy B-Roll:
Monday, July 31, 2000 Monday, July 31, 2000
7:00 am - 7:30 am (Eastern time) 12:00 pm - 12:30 pm (Eastern time)
Telstar 6 Transponder 9 C-Band Telstar 6 Transponder 9 C-Band
Downlink Frequency 3880 Vertical Downlink Frequency 3880 Vertical
If you have any technical questions or problems with the satellite feed for
B-Roll, please call Brett Curran at (212) 627-5622.
Contacts for FPL Group: Contacts for Entergy:
Investors: Investors:
Lisa Kuzel Renae Conley
(561) 694-4697 504-576-4947
[email protected] [email protected]
For Media Inquiries: For Media Inquiries:
305-552-3888 504-576-4238
