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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 7, 1997
POTOMAC ELECTRIC POWER COMPANY
(Exact name of registrant as specified in its charter)
District of Columbia 1-1072 53-0127880
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1900 Pennsylvania Avenue, N. W.
Washington, D. C. 20068
(Address of principal executive offices) (Zip Code)
202-872-2450
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
1
<PAGE>
ITEM 5. Other Events
- ------- ------------
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
- ------------------------------------------------------------
The following unaudited pro forma condensed financial information combines
the historical consolidated balance sheets and statements of income of Baltimore
Gas and Electric Company (BGE) and Potomac Electric Power Company (PEPCO),
including their respective subsidiaries, after giving effect to the proposed
merger (the Merger) of the two companies into Constellation Energy Corporation.
As previously disclosed by BGE, the Merger is expected to close after all
necessary regulatory approvals are obtained. As of the date of this filing, the
Merger has not closed. The unaudited pro forma combined condensed balance sheets
at December 31, 1996 and 1995 give effect to the Merger as if it had occurred at
December 31, 1995. The unaudited pro forma combined condensed statements of
income for each of the three years ended December 31, 1996, 1995, and 1994, give
effect to the Merger as if it had occurred at January 1, 1994. These statements
are prepared on the basis of accounting for the Merger as a pooling of interests
and are based on the assumptions set forth in the notes thereto. The registrant,
Constellation Energy Corporation, was formed September 22, 1995, and has no
assets or operations. Therefore, the registrant has no financial statements and,
in turn, there has been no audit of such statements.
The PEPCO income statement for the twelve month period ended December 31,
1995 includes a $110 million one-time, non-cash, after-tax charge to earnings
recorded in the second quarter of 1995 in connection with the plan to sell 13
aircraft owned by its subsidiary, Potomac Capital Investment Corporation, as
part of the adoption of a plan to end investment in the aircraft equipment
leasing business. Income for the twelve months ended December 31, 1995 also
includes a nonrecurring charge of $12 million ($0.11 per share) relating to
valuation of two aircraft under a master lease agreement which expired in
September 1995.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of BGE and PEPCO, which are contained in
their respective 1934 Act reports for prior periods. The following information
is not necessarily indicative of the financial position or operating results
that would have occurred had the Merger been consummated on the dates, or at the
beginning of the periods, for which the Merger is being given effect nor is it
necessarily indicative of future financial position or operating results.
The following unaudited pro forma combined condensed financial information
of Constellation Energy Corporation is set forth in this Form 8-K:
Balance Sheet as of December 31, 1996
Balance Sheet as of December 31, 1995
Income Statement for the Twelve Months Ended December 31, 1996
Income Statement for the Twelve Months Ended December 31, 1995
Income Statement for the Twelve Months Ended December 31, 1994
Notes to Consolidated Financial Statements
The following financial information of PEPCO is also set forth in this Form
8-K:
Reclassifying Balance Sheet as of December 31, 1996
Reclassifying Balance Sheet as of December 31, 1995
Reclassifying Statement of Income for the Twelve Months Ended December 31, 1996
Reclassifying Statement of Income for the Twelve Months Ended December 31, 1995
Reclassifying Statement of Income for the Twelve Months Ended December 31, 1994
OTHER INFORMATION
- -----------------
Both BGE and PEPCO file annual and quarterly reports with the Securities
and Exchange Commission (SEC). These are available at the SEC's public reference
rooms in Washington, D.C. and New York, New York (call 1-800-SEC-0330 for more
information); and at the SEC's web site at http://www.sec.gov. BGE's reports are
also available at BGE's web site at http://www.bge.com.
2
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
BGE PEPCO Pro Forma Pro Forma
(As Reported) (As Reclassified) Adjustments Combined
------------- ----------------- ------------ --------
ASSETS (See Note 5)
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents ............................. $ 66,708 $ 2,978 $ 69,686
Accounts receivable - net ............................. 419,479 231,646 651,125
Materials and supplies ................................ 147,729 137,773 285,502
Prepayments and other ................................. 268,282 38,815 307,097
------- ------ -------
Total current assets ........................... 902,198 411,212 1,313,410
Investments and Other Assets
Notes receivable ...................................... -- 93,403 93,403
Real estate projects .................................. 525,765 67,940 593,705
Power generation systems .............................. 379,130 880 380,010
Financial investments ................................. 124,937 -- 124,937
Marketable securities ................................. 46,231 377,237 423,468
Investment in finance leases .......................... 33,275 484,972 518,247
Operating lease equipment - net ....................... -- 199,124 199,124
Assets held for disposal .............................. -- 10,300 10,300
Other investments ..................................... 363,827 124,182 488,009
------- ------- -------
Total investments and other assets .................... 1,473,165 1,358,038 2,831,203
Utility Plant
Plant in service
Electric ........................................... 6,514,950 6,232,049 12,746,999
Gas ................................................ 776,973 -- 776,973
Common ............................................. 523,485 -- 523,485
------- --------- -------
Total plant in service ............................. 7,815,408 6,232,049 14,047,457
--------- --------- ----------
Accumulated depreciation .............................. (2,613,355) (1,897,489) (4,510,844)
Construction work in progress ......................... 221,857 62,469 284,326
Nuclear fuel - net .................................... 132,937 -- 132,937
Other plant - net ..................................... 25,503 26,220 51,723
------ ------ ------
Net utility plant ............................ 5,582,350 4,423,249 10,005,599
--------- --------- ----------
Deferred charges
Regulatory assets ..................................... 512,279 469,778 982,057
Other ................................................. 80,978 168,651 249,629
------ ------- -------
Total deferred charges .......................... 593,257 638,429 1,231,686
------- ------- ---------
Total Assets ............................................... $ 8,550,970 $ 6,830,928 $ 15,381,898
============ ============ ============
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
3
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
BGE PEPCO Pro Forma Pro Forma
(As Reported) (As Reclassified) Adjustments Combined
--------- ---------------- ----------- --------
LIABILITIES AND CAPITALIZATION (See Note 5)
Current Liabilities
<S> <C> <C> <C> <C>
Short-term borrowings ....................................... $ 333,185 $ 183,040 $ 516,225
Current portion of long-term debt,
preferred stock, and preference stock .................... 280,772 353,267 634,039
Accounts payable ............................................ 172,889 224,354 397,243
Other ....................................................... 230,253 103,907 334,160
------- ------- -------
Total current liabilities .............................. 1,017,099 864,568 1,881,667
--------- ------- ---------
Deferred Credits and Other Liabilities
Deferred income taxes ....................................... 1,300,174 1,034,710 2,334,884
Capital lease obligations.................................... -- 162,936 162,936
Pension and postemployment benefits ......................... 169,253 -- 169,253
Other ....................................................... 104,062 48,716 152,778
------- ------ -------
Total deferred credits and other liabilities .................... 1,573,489 1,246,362 2,819,851
--------- --------- ---------
Capitalization
Long-term debt .............................................. 2,758,769 2,563,008 5,321,777
Preferred stock ............................................. -- 267,798 267,798
Preference stock ............................................ 344,500 -- 344,500
Common shareholders' equity ................................. 2,857,113 1,889,192 4,746,305
--------- --------- ---------
Total capitalization ................................. 5,960,382 4,719,998 10,680,380
--------- --------- ----------
Total Liabilities and Capitalization ............................. $ 8,550,970 $ 6,830,928 $15,381,898
=========== =========== ===========
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
4
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
BGE PEPCO Pro Forma Pro Forma
(As Reported) (As Reclassified) Adjustments Combined
------------- ----------------- ----------- --------
ASSETS (See Note 5)
Current Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents ............................. $ 23,443 $ 7,438 $ 30,881
Accounts receivable - net ............................. 400,005 260,625 660,630
Materials and supplies ................................ 145,900 133,700 279,600
Prepayments and other ................................. 236,430 43,817 280,247
------- ------ -------
Total current assets ........................... 805,778 445,580 1,251,358
------- ------- ---------
Investments and Other Assets
Notes receivable ...................................... -- 62,175 62,175
Real estate projects .................................. 479,344 71,025 550,369
Power generation systems .............................. 358,629 626 359,255
Financial investments ................................. 128,815 -- 128,815
Marketable securities ................................. 41,475 530,323 571,798
Investment in finance leases .......................... 35,551 438,795 474,346
Operating lease equipment - net ....................... -- 272,947 272,947
Assets held for disposal .............................. -- 104,370 104,370
Other investments ..................................... 268,154 132,626 400,780
------- ------- -------
Total investments and other assets .................... 1,311,968 1,612,887 2,924,855
--------- --------- ---------
Utility Plant
Plant in service
Electric ........................................... 6,360,624 6,041,203 12,401,827
Gas ................................................ 692,693 -- 692,693
Common ............................................. 522,450 -- 522,450
------- --------- -------
Total plant in service ............................. 7,575,767 6,041,203 13,616,970
--------- --------- ----------
Accumulated depreciation .............................. (2,481,801) (1,760,063) (4,241,864)
Construction work in progress ......................... 247,296 93,047 340,343
Nuclear fuel - net .................................... 130,782 -- 130,782
Other plant - net ..................................... 25,552 26,124 51,676
------ ------ ------
Net utility plant ............................ 5,497,596 4,400,311 9,897,907
--------- --------- ---------
Deferred charges
Regulatory assets ..................................... 637,915 471,102 1,109,017
Other ................................................. 63,406 123,663 187,069
------ ------- -------
Total deferred charges .......................... 701,321 594,765 1,296,086
------- ------- ---------
Total Assets ............................................... $ 8,316,663 $ 7,053,543 $ 15,370,206
============ ============ ============
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
Certain amounts have been reclassified to conform with the 1996 presentation.
</TABLE>
5
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
BGE PEPCO Pro Forma Pro Forma
(As Reported) (As Reclassified) Adjustments Combined
------------- ---------------- ----------- --------
LIABILITIES AND CAPITALIZATION See Note 5)
Current Liabilities
<S> <C> <C> <C> <C>
Short-term borrowings ....................................... $ 279,305 $ 481,815 $ 761,120
Current portion of long-term debt,
preferred stock, and preference stock .................... 146,969 263,979 410,948
Accounts payable ............................................ 177,092 225,345 402,437
Other ....................................................... 231,789 106,806 338,595
------- ------- -------
Total current liabilities .............................. 835,155 1,077,945 1,913,100
------- --------- ---------
Deferred Credits and Other Liabilities
Deferred income taxes ....................................... 1,311,530 995,504 2,307,034
Capital lease obligations.................................... -- 165,235 165,235
Pension and postemployment benefits ......................... 148,594 -- 148,594
Other ....................................................... 99,263 47,875 147,138
------ ------ -------
Total deferred credits and other liabilities .................... 1,559,387 1,208,614 2,768,001
--------- --------- ---------
Capitalization
Long-term debt .............................................. 2,598,254 2,626,862 5,225,116
Preferred stock ............................................. 59,185 268,810 327,995
Preference stock ............................................ 452,000 -- 452,000
Common shareholders' equity ................................. 2,812,682 1,871,312 4,683,994
--------- --------- ---------
Total capitalization ................................. 5,922,121 4,766,984 10,689,105
--------- --------- ----------
Total Liabilities and Capitalization ............................. $ 8,316,663 $ 7,053,543 $15,370,206
=========== =========== ===========
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
6
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Pro
BGE PEPCO Forma Pro Forma
(As Reported)(As Reclassified) Adj Combined
------------- -------------- --- --------
(See Note 5)
Revenues
<S> <C> <C> <C> <C>
Electric ....................................................... $2,208,744 $2,010,311 $4,219,055
Gas ............................................................ 517,292 -- 517,292
Diversified businesses ......................................... 427,211 116,421 543,632
------- ------- -------
Total revenues .............................. 3,153,247 2,126,732 5,279,979
Operating Expenses
Electric fuel and purchased energy ............................. 547,414 789,556 1,336,970
Disallowed replacement energy costs ............................ 95,369 -- 95,369
Gas purchased for resale ....................................... 284,443 -- 284,443
Operations ..................................................... 526,424 223,326 749,750
Maintenance .................................................... 174,141 91,524 265,665
Diversified businesses expenses ................................ 311,053 58,130 369,183
Loss on assets held for disposal ............................... -- 12,744 12,744
Depreciation and amortization .................................. 330,191 223,016 553,207
Taxes other than income taxes .................................. 214,747 200,365 415,112
------- ------- -------
Total operating expenses ......................... 2,483,782 1,598,661 4,082,443
--------- --------- ---------
Income From Operations .............................................. 669,465 528,071 1,197,536
Total Other Income .................................................. 6,130 12,400 18,530
----- ------ ------
Income Before Interest and Income Taxes ............................. 675,595 540,471 1,216,066
Net Interest Expense ................................................ 198,438 223,124 421,562
------- ------- -------
Income Before Income Taxes .......................................... 477,157 317,347 794,504
Income Taxes ........................................................ 166,333 80,387 246,720
------- ------ -------
Net Income .......................................................... 310,824 236,960 547,784
Preferred and Preference Stock Dividends ............................ 38,536 16,604 55,140
------ ------ ------
Earnings Applicable to Common Stock ................................. $ 272,288 $ 220,356 $ 492,644
========== ========== ==========
Average Shares of Common Stock Outstanding (Note 2) ................. 147,560 118,497 265,701
Earnings Per Share of Common Stock .................................. $1.85 $1.86 $1.85
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
7
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Pro
BGE PEPCO Forma Pro Forma
(As Reported)(As Reclassified) Adj Combined
------------- ------------- ---- --------
(See Note 5)
Revenues
<S> <C> <C> <C> <C>
Electric ....................................................... $2,229,774 $1,876,102 $4,105,876
Gas ............................................................ 400,504 -- 400,504
Diversified businesses ......................................... 304,521 134,257 438,778
------- ------- -------
Total revenues .............................. 2,934,799 2,010,359 4,945,158
Operating Expenses
Electric fuel and purchased energy ............................. 578,801 674,814 1,253,615
Gas purchased for resale ....................................... 198,069 -- 198,069
Operations ..................................................... 550,811 224,030 774,841
Maintenance .................................................... 168,269 92,859 261,128
Diversified businesses expenses ................................ 220,573 84,686 305,259
Loss on assets held for disposal ............................... -- 170,078 170,078
Depreciation and amortization .................................. 317,417 205,490 522,907
Taxes other than income taxes .................................. 205,167 202,708 407,875
------- ------- -------
Total operating expenses ......................... 2,239,107 1,654,665 3,893,772
--------- --------- ---------
Income From Operations .............................................. 695,692 355,694 1,051,386
Total Other Income .................................................. 8,819 10,402 19,221
----- ------ ------
Income Before Interest and Income Taxes ............................. 704,511 366,096 1,070,607
Net Interest Expense ................................................ 196,977 227,974 424,951
------- ------- -------
Income Before Income Taxes .......................................... 507,534 138,122 645,656
Income Taxes ........................................................ 169,527 43,731 213,258
------- ------ -------
Net Income .......................................................... 338,007 94,391 432,398
Preferred and Preference Stock Dividends ............................ 40,578 16,851 57,429
------ ------ ------
Earnings Applicable to Common Stock ................................. $ 297,429 $ 77,540 $ 374,969
========== ========== ==========
Average Shares of Common Stock Outstanding (Note 2) ................. 147,527 118,412 265,584
Earnings Per Share of Common Stock .................................. $2.02 $0.65 $1.41
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
8
<PAGE>
CONSTELLATION ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Pro
BGE PEPCO Forma Pro Forma
(As Reported) (As Reclassified) Adj Combined
------------- ------------- ---- --------
(See Note 5)
Revenues
<S> <C> <C> <C> <C>
Electric ....................................................... $2,126,581 $1,823,074 $3,949,655
Gas ............................................................ 421,249 -- 421,249
Diversified businesses ......................................... 235,155 146,951 382,106
------- ------- -------
Total revenues .............................. 2,782,985 1,970,025 4,753,010
Operating Expenses
Electric fuel and purchased energy ............................. 542,314 693,936 1,236,250
Gas purchased for resale ....................................... 224,590 -- 224,590
Operations ..................................................... 552,817 206,106 758,923
Maintenance .................................................... 164,892 92,614 257,506
Diversified businesses expenses ................................ 167,430 66,401 233,831
Depreciation and amortization .................................. 295,950 179,986 475,936
Taxes other than income taxes .................................. 199,733 206,080 405,813
------- ------- -------
Total operating expenses ......................... 2,147,726 1,445,123 3,592,849
--------- --------- ---------
Income From Operations .............................................. 635,259 524,902 1,160,161
Total Other Income .................................................. 32,365 8,123 40,488
------ ------ ------
Income Before Interest and Income Taxes ............................. 667,624 533,025 1,200,649
Net Interest Expense ................................................ 190,154 211,910 402,064
------- ------- -------
Income Before Income Taxes .......................................... 477,470 321,115 798,585
Income Taxes ........................................................ 153,853 93,953 247,806
------- ------ -------
Net Income .......................................................... 323,617 227,162 550,779
Preferred and Preference Stock Dividends ............................ 39,922 16,437 56,359
------ ------ ------
Earnings Applicable to Common Stock ................................. $ 283,695 $ 210,725 $ 494,420
========== ========== ==========
Average Shares of Common Stock Outstanding (Note 2) ................. 147,100 118,006 264,752
Earnings Per Share of Common Stock .................................. $1.93 $1.79 $1.87
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements
</TABLE>
9
<PAGE>
PEPCO
RECLASSIFYING BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
ASSETS
Current Assets
<S> <C> <C> <C>
Cash and cash equivalents .................................. $ 2,174 $ 804 $ 2,978
Accounts receivable - net .................................. -- 231,646 231,646
Customer accounts receivable - net ......................... 128,600 (128,600) --
Other accounts receivable - net ............................ 38,490 (38,490) --
Accrued unbilled revenue ................................... 70,214 (70,214) --
Materials and supplies ..................................... -- 137,773 137,773
Fuel .................................................... 68,232 (68,232) --
Construction and maintenance ............................ 69,541 (69,541) --
Prepayments and other ...................................... -- 38,815 38,815
Prepaid taxes .............................................. 34,202 (34,202) --
Other prepaid expenses ..................................... 4,613 (4,613) --
----- ------ -------
Total current assets ..................... 416,066 (4,854) 411,212
Investments and Other Assets
Notes receivable ........................................... -- 93,403 93,403
Real estate projects ....................................... -- 67,940 67,940
Power generation systems ................................... -- 880 880
Marketable securities ...................................... -- 377,237 377,237
Investment in finance leases ............................... -- 484,972 484,972
Operating lease equipment - net ............................ -- 199,124 199,124
Assets held for disposal ................................... -- 10,300 10,300
Other investments .......................................... -- 124,182 124,182
------ ------- -------
Total investments and other assets .............. -- 1,358,038 1,358,038
Utility Plant
Plant in service
Electric ................................................ 6,232,049 -- 6,232,049
Construction work in progress ........................... 62,469 (62,469) --
Electric plant held for future use ...................... 4,152 (4,152) --
Nonoperating property ................................... 22,921 (22,921) --
------ ------- --------
Total plant in service .................................. 6,321,591 (89,542) 6,232,049
Accumulated depreciation ................................... (1,898,342) 853 (1,897,489)
Construction work in progress .............................. -- 62,469 62,469
Other plant - net .......................................... -- 26,220 26,220
-------- ------ ------
Net utility plant ...................... 4,423,249 -- 4,423,249
Deferred Charges
Regulatory assets .......................................... -- 469,778 469,778
Income taxes recoverable through future rates, net ......... 238,467 (238,467) --
Conservation costs, net..................................... 233,793 (233,793) --
Unamortized debt reacquisition costs ....................... 55,552 (55,552) --
Other ...................................................... 159,139 9,512 168,651
------- ----- -------
Total deferred charges .................... 686,951 (48,522) 638,429
Nonutility Subsidiary Assets
Cash and cash equivalents .................................. 804 (804) --
Marketable securities ...................................... 377,237 (377,237) --
Investment in finance leases ............................... 484,972 (484,972) --
Operating lease equipment - net ............................ 199,124 (199,124) --
Assets held for disposal ................................... 10,300 (10,300) --
Receivables - net .......................................... 87,745 (87,745) --
Other investments .......................................... 193,002 (193,002) --
Other assets ............................................... 12,436 (12,436) --
------ ------- -------
Total nonutility subsidiary assets .............. 1,365,620 (1,365,620) --
--------- ---------- -------
Total Assets .................................................... $ 6,891,886 $ (60,958) $6,830,928
=========== ========== ==========
</TABLE>
10
<PAGE>
PEPCO
RECLASSIFYING BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
LIABILITIES AND CAPITALIZATION
Current Liabilities
<S> <C> <C> <C>
Short-term borrowings ........................................ $ 131,390 $ 51,650 $183,040
Current portion of long-term debt
and preferred stock ....................................... 152,445 200,822 353,267
Accounts payable and accrued expenses ........................ 179,289 45,065 224,354
Capital lease obligations due within one year ................ 20,772 (20,772) --
Other ........................................................ 83,135 20,772 103,907
------ ------ -------
Total current liabilities .................... 567,031 297,537 864,568
Deferred Credits and Other Liabilities
Deferred income taxes ........................................ 973,642 61,068 1,034,710
Deferred investment tax credits .............................. 60,958 (60,958) --
Capital lease obligations..................................... -- 162,936 162,936
Pension and postemployment benefits .......................... -- -- --
Other ........................................................ 35,658 13,058 48,716
------ ------ ------
Total deferred credits and other liabilities ........... 1,070,258 176,104 1,246,362
Other Noncurrent Liabilities
Capital lease obligations .................................... 162,936 (162,936) --
------- -------- ---------
Total other noncurrent liabilities ................ 162,936 (162,936) --
Capitalization
Long-term debt ............................................... 1,767,598 795,410 2,563,008
Preferred stock .............................................. -- 267,798 267,798
Serial preferred stock ....................................... 125,298 (125,298) --
Redeemable serial preferred stock ............................ 142,500 (142,500) --
Common shareholders' equity .................................. -- 1,889,192 1,889,192
Common stock ................................................. 118,500 (118,500) --
Other common equity .......................................... 1,770,692 (1,770,692) --
--------- ---------- ---------
Total capitalization ....................... 3,924,588 795,410 4,719,998
Nonutility Subsidiary Liabilities
Long-term debt ............................................... 996,232 (996,232) --
Short-term notes payable ..................................... 51,650 (51,650) --
Deferred taxes and other ..................................... 119,191 (119,191) --
------- -------- ---------
Total nonutility subsidiary liabilities ............. 1,167,073 (1,167,073) --
--------- ---------- ---------
Total Liabilities and Capitalization .............................. $6,891,886 $ (60,958) $6,830,928
========== ========= ==========
</TABLE>
11
<PAGE>
PEPCO
RECLASSIFYING BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
ASSETS
Current Assets
<S> <C> <C> <C>
Cash and cash equivalents .................................. $ 5,844 $ 1,594 $ 7,438
Accounts receivable - net .................................. -- 260,625 260,625
Customer accounts receivable - net ......................... 137,456 (137,456) --
Other accounts receivable - net ............................ 36,765 (36,765) --
Accrued unbilled revenue ................................... 73,622 (73,622) --
Materials and supplies ..................................... -- 133,700 133,700
Fuel .................................................... 63,203 (63,203) --
Construction and maintenance ............................ 70,497 (70,497) --
Prepayments and other ...................................... -- 43,817 43,817
Prepaid taxes .............................................. 36,255 (36,255) --
Other prepaid expenses ..................................... 7,562 (7,562) --
----- ------ -------
Total current assets ..................... 431,204 14,376 445,580
Investments and Other Assets
Notes receivable ........................................... -- 62,175 62,175
Real estate projects ....................................... -- 71,025 71,025
Power generation systems ................................... -- 626 626
Marketable securities ...................................... -- 530,323 530,323
Investment in finance leases ............................... -- 438,795 438,795
Operating lease equipment - net ............................ -- 272,947 272,947
Assets held for disposal ................................... -- 104,370 104,370
Other investments .......................................... -- 132,626 132,626
------- ------ ------
Total investments and other assets .............. -- 1,612,887 1,612,887
Utility Plant
Plant in service
Electric ................................................ 6,041,203 -- 6,041,203
Construction work in progress ........................... 93,047 (93,047) --
Electric plant held for future use ...................... 4,082 (4,082) --
Nonoperating property ................................... 22,771 (22,771) --
------ ------- ---------
Total plant in service .................................. 6,161,103 (119,900) 6,041,203
Accumulated depreciation ................................... (1,760,792) 729 (1,760,063)
Construction work in progress .............................. -- 93,047 93,047
Other plant - net .......................................... -- 26,124 26,124
--------- ------ ------
Net utility plant ...................... 4,400,311 -- 4,400,311
Deferred Charges
Regulatory assets .......................................... -- 471,102 471,102
Income taxes recoverable through future rates, net ......... 244,181 (244,181) --
Conservation costs, net..................................... 230,412 (230,412) --
Unamortized debt reacquisition costs ....................... 58,360 (58,360) --
Other ...................................................... 138,619 (14,956) 123,663
------- ------- -------
Total deferred charges .................... 671,572 (76,807) 594,765
Nonutility Subsidiary Assets
Cash and cash equivalents .................................. 1,594 (1,594) --
Marketable securities ...................................... 530,323 (530,323) --
Investment in finance leases ............................... 438,795 (438,795) --
Operating lease equipment - net ............................ 272,947 (272,947) --
Assets held for disposal ................................... 104,370 (104,370) --
Receivables - net .......................................... 74,957 (74,957) --
Other investments .......................................... 176,418 (176,418) --
Other assets ............................................... 15,659 (15,659) --
------ ------- -------
Total nonutility subsidiary assets .............. 1,615,063 (1,615,063) --
--------- ---------- -------
Total Assets .................................................... $ 7,118,150 $ (64,607) $ 7,053,543
=========== =========== ===========
Certain amounts have been reclassified to conform with the 1996 presentation.
</TABLE>
12
<PAGE>
PEPCO
RECLASSIFYING BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
LIABILITIES AND CAPITALIZATION
Current Liabilities
<S> <C> <C> <C>
Short-term borrowings .................................... $ 258,465 $ 223,350 $ 481,815
Current portion of long-term debt
and preferred stock ................................... 26,280 237,699 263,979
Accounts payable and accrued expenses .................... 162,039 63,306 225,345
Capital lease obligations due within one year ............ 20,772 (20,772) --
Other .................................................... 86,034 20,772 106,806
------ ------ -------
Total current liabilities ................ 553,590 524,355 1,077,945
Deferred Credits and Other Liabilities
Deferred income taxes .................................... 892,544 102,960 995,504
Deferred investment tax credits .......................... 64,607 (64,607) --
Capital lease obligations................................. -- 165,235 165,235
Pension and postemployment benefits ...................... -- -- --
Other .................................................... 35,089 12,786 47,875
------ ------ ------
Total deferred credits and other liabilities ....... 992,240 216,374 1,208,614
Other Noncurrent Liabilities
Capital lease obligations ................................ 165,235 (165,235) --
------- -------- --------
Total other noncurrent liabilities ............ 165,235 (165,235) --
Capitalization
Long-term debt ........................................... 1,817,077 809,785 2,626,862
Preferred stock .......................................... -- 268,810 268,810
Serial preferred stock ................................... 125,325 (125,325) --
Redeemable serial preferred stock ........................ 143,485 (143,485) --
Common shareholders' equity .............................. -- 1,871,312 1,871,312
Common stock ............................................. 118,495 (118,495) --
Other common equity ...................................... 1,752,817 (1,752,817) --
--------- ---------- ---------
Total capitalization ................... 3,957,199 809,785 4,766,984
Nonutility Subsidiary Liabilities
Long-term debt ........................................... 1,047,484 (1,047,484) --
Short-term notes payable ................................. 223,350 (223,350) --
Deferred taxes and other ................................. 179,052 (179,052) --
------- -------- ---------
Total nonutility subsidiary liabilities ......... 1,449,886 (1,449,886) --
--------- ---------- ---------
Total Liabilities and Capitalization .......................... $ 7,118,150 $ (64,607) $7,053,543
=========== ========== ==========
</TABLE>
13
<PAGE>
PEPCO
RECLASSIFYING STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
Revenues
<S> <C> <C> <C>
Electric .......................................................... $ 2,010,311 $ -- $2,010,311
Gas ............................................................... -- -- --
Diversified businesses ............................................ -- 116,421 116,421
---------- ------- -------
Total revenues ................................. 2,010,311 116,421 2,126,732
Operating Expenses
Electric fuel and purchased energy ................................ -- 789,556 789,556
Fuel .............................................................. 327,792 (327,792) --
Purchased energy .................................................. 335,978 (335,978) --
Capacity purchase payments ........................................ 125,786 (125,786) --
Operations ........................................................ 223,326 -- 223,326
Maintenance ....................................................... 91,524 -- 91,524
Diversified businesses expenses ................................... -- 58,130 58,130
Loss on assets held for disposal .................................. -- 12,744 12,744
Depreciation and amortization ..................................... 223,016 -- 223,016
Income taxes ...................................................... 134,085 (134,085) --
Taxes other than income taxes ..................................... 200,365 -- 200,365
------- -------- -------
Total operating expenses ............................ 1,661,872 (63,211) 1,598,661
--------- ------- ---------
Income From Operations ................................................. 348,439 179,632 528,071
Other Income (Loss)
Nonutility subsidiary income ...................................... 114,966 (114,966) --
Loss on assets held for disposal .................................. (12,744) 12,744 --
Expenses, including interest and income taxes ..................... (85,328) 85,328 --
------- ------ --------
Net earnings from nonutility subsidiary .................... 16,894 (16,894) --
Allowance for other funds used during construction
and capital cost recovery factor ........................... 6,572 -- 6,572
Other, net ........................................................ 4,458 1,370 5,828
----- ----- -----
Total Other Income (Loss) ............................ 27,924 (15,524) 12,400
------ ------- ------
Income Before Interest and Income Taxes ................................ 376,363 164,108 540,471
Interest Charges
Interest on debt .................................................. 133,106 -- 133,106
Other ............................................................. 13,833 -- 13,833
Subsidiary interest expense ....................................... -- 83,721 83,721
Allowance for borrowed funds used during construction
and capital cost recovery factor ........................... (7,536) -- (7,536)
------ ----- ------
Net Interest Charges .............................. 139,403 83,721 223,124
------- ------ -------
Income Before Income Taxes ............................................. 236,960 80,387 317,347
Income Taxes
Income taxes-utility .............................................. -- 134,085 134,085
Income taxes-nonoperating ......................................... -- 1,061 1,061
Income taxes-subsidiary ........................................... -- (54,759) (54,759)
------- ------- -------
Total Income Taxes ............................... -- 80,387 80,387
------- ------ ------
Net Income ............................................................. 236,960 -- 236,960
Preferred Dividends .................................................... 16,604 -- 16,604
------ ------- ------
Earnings Applicable to Common Stock .................................... $ 220,356 $ -- $220,356
=========== ========= ========
Average Shares of Common Stock Outstanding ............................. 118,497 118,497
Earnings Per Share of Common Stock ..................................... $ 1.86 $ 1.86
</TABLE>
14
<PAGE>
PEPCO
RECLASSIFYING STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
Revenues
<S> <C> <C> <C>
Electric .......................................................... $ 1,876,102 $ -- $1,876,102
Gas ............................................................... -- -- --
Diversified businesses ............................................ -- 134,257 134,257
--------- ------- -------
Total revenues ................................. 1,876,102 134,257 2,010,359
Operating Expenses
Electric fuel and purchased energy ................................ -- 674,814 674,814
Fuel .............................................................. 355,453 (355,453) --
Purchased energy .................................................. 193,592 (193,592) --
Capacity purchase payments ........................................ 125,769 (125,769) --
Operations ........................................................ 224,030 -- 224,030
Maintenance ....................................................... 92,859 -- 92,859
Diversified businesses expenses ................................... -- 84,686 84,686
Loss on assets held for disposal .................................. -- 170,078 170,078
Depreciation and amortization ..................................... 205,490 -- 205,490
Income taxes ...................................................... 128,460 (128,460) --
Taxes other than income taxes ..................................... 202,708 -- 202,708
------- -------- -------
Total operating expenses ............................ 1,528,361 126,304 1,654,665
--------- ------- ---------
Income From Operations ................................................. 347,741 7,953 355,694
Other (Loss) Income
Nonutility subsidiary income ...................................... 134,493 (134,493) --
Loss on assets held for disposal .................................. (170,078) 170,078 --
Expenses, including interest and income taxes ..................... (88,812) 88,812 --
------- ------ -------
Net loss from nonutility subsidiary ........................ (124,397) 124,397 --
Allowance for other funds used during construction
and capital cost recovery factor ........................... 6,155 -- 6 155
Other, net ........................................................ 682 3,565 4,247
----- ----- ------
Total Other (Loss) Income ............................. (117,560) 127,962 10,402
-------- ------- ------
Income Before Interest and Income Taxes ................................ 230,181 135,915 366,096
Interest Charges
Interest on debt .................................................. 131,620 -- 131,620
Other ............................................................. 14,938 -- 14,938
Subsidiary interest expense ....................................... -- 92,184 92,184
Allowance for borrowed funds used during construction
and capital cost recovery factor ........................... (10,768) -- (10,768)
------ ------- ------
Net Interest Charges .............................. 135,790 92,184 227,974
------- ------ -------
Income Before Income Taxes ............................................. 94,391 43,731 138,122
Income Taxes
Income taxes-utility .............................................. -- 128,460 128,460
Income taxes-nonoperating ......................................... -- 1,884 1,884
Income taxes-subsidiary ........................................... -- (86,613) (86,613)
------ ------- -------
Total Income Taxes ............................... -- 43,731 43,731
------ ------ ------
Net Income ............................................................. 94,391 -- 94,391
Preferred Dividends .................................................... 16,851 -- 16,851
------ ------- ------
Earnings Applicable to Common Stock .................................... $ 77,540 $ -- $77,540
======== ======== =======
Average Shares of Common Stock Outstanding ............................. 118,412 118,412
Earnings Per Share of Common Stock ..................................... $ 0.65 $ 0.65
Certain amounts have been reclassified to conform with the 1996 presentation.
</TABLE>
15
<PAGE>
PEPCO
RECLASSIFYING STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
PEPCO PEPCO PEPCO
(As Reported) (Reclasses) (As Reclassified)
------------- ----------- -----------------
Revenues
<S> <C> <C> <C>
Electric .......................................................... $ 1,823,074 $ -- $1,823,074
Gas ............................................................... -- -- --
Diversified businesses ............................................ -- 146,951 146,951
--------- ------- -------
Total revenues ................................. 1,823,074 146,951 1,970,025
Operating Expenses
Electric fuel and purchased energy ................................ -- 693,936 693,936
Fuel .............................................................. 392,730 (392,730) --
Purchased energy .................................................. 173,384 (173,384) --
Capacity purchase payments ........................................ 127,822 (127,822) --
Operations ........................................................ 206,106 -- 206,106
Maintenance ....................................................... 92,614 -- 92,614
Diversified businesses expenses ................................... -- 66,401 66,401
Depreciation and amortization ..................................... 179,986 -- 179,986
Income taxes ...................................................... 119,859 (119,859) --
Taxes other than income taxes ..................................... 206,080 -- 206,080
------- ------- -------
Total operating expenses ............................ 1,498,581 (53,458) 1,445,123
--------- ------- ---------
Income From Operations ................................................. 324,493 200,409 524,902
Other Income
Nonutility subsidiary income ...................................... 147,006 (147,006) --
Expenses, including interest and income taxes ..................... (127,918) 127,918 --
-------- ------- -------
Net earnings from nonutility subsidiary .................... 19,088 (19,088) --
Allowance for other funds used during construction
and capital cost recovery factor ........................... 12,610 -- 12,610
Other, net ........................................................ (1,902) (2,585) (4,487)
----- ------ -----
Total Other Income ................................... 29,796 (21,673) 8,123
------ ------- ------
Income Before Interest and Income Taxes ................................ 354,289 178,736 533,025
Interest Charges
Interest on debt .................................................. 127,401 -- 127,401
Other.............................................................. 11,809 -- 11,809
Subsidiary interest expense ....................................... -- 84,783 84,783
Allowance for borrowed funds used during construction
and capital cost recovery factor ........................... (12,083) -- (12,083)
------ ------ ------
Net Interest Charges .............................. 127,127 84,783 211,910
------- ------ -------
Income Before Income Taxes ............................................. 227,162 93,953 321,115
Income Taxes
Income taxes-utility .............................................. -- 119,859 119,859
Income taxes-nonoperating ......................................... -- (2,995) (2,995)
Income taxes-subsidiary ........................................... -- (22,911) (22,911)
-------- ------- -------
Total Income Taxes ............................... -- 93,953 93,953
-------- ------ ------
Net Income ............................................................. 227,162 -- 227,162
Preferred Dividends ................................................... 16,437 -- 16,437
------ ------- ------
Earnings Applicable to Common Stock .................................... $ 210,725 $ -- $210,725
=========== =========== ========
Average Shares of Common Stock Outstanding ............................. 118,006 118,006
Earnings Per Share of Common Stock ..................................... $ 1.79 $ 1.79
Certain amounts have been reclassified to conform with the 1996 presentation.
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1.The revenues, expenses, assets, and liabilities of PEPCO's nonregulated
subsidiaries have been reclassified to conform with the presentation utilized
by BGE. The effect of accounting policy differences are immaterial and have
not been adjusted in the pro forma combined condensed financial statements.
2.Pro forma per common share amounts give effect to the conversion of each share
of BGE and PEPCO Common Stock into 1 share and .997 share, respectively of
Constellation Energy Corporation Common Stock. The pro forma combined
condensed financial statements are presented as if the companies were combined
during all periods included therein.
3.The allocation between BGE and PEPCO and their customers of the estimated cost
savings resulting from the Merger, net of the costs incurred to achieve such
savings, will be subject to regulatory review and approval. None of these
estimated cost savings, the costs to achieve such savings, or transaction
costs have been reflected in the pro forma combined condensed financial
statements.
4.Intercompany transactions between BGE and PEPCO during the periods presented
were not material and, accordingly, no pro forma adjustments were made to
eliminate such transactions.
5.The PEPCO reclassifying information reflects the reclassifying entries
necessary to adjust PEPCO's consolidated balance sheet and statement of income
presentation to be consistent with the presentation expected to be used by the
Constellation Energy Corporation.
17
<PAGE>
ITEM 7. Financial Statements and Exhibits
(c) Exhibit No. 2* Registration Statement on Form S-4
of Constellation Energy
Corporation, as amended, which
became effective February 9,
1996, Registration No. 33-64799.
*Incorporated by Reference.
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.
POTOMAC ELECTRIC POWER COMPANY
(Registrant)
Date April 7, 1997 /s/ D. R. Wraase
Dennis R. Wraase
Senior Vice President and
Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
Exhibit
Number
2* Registration Statement on Form S-4 of
Constellation Energy Corporation, as
amended, which became effective
February 9, 1996, Registration No. 33-
64799.
*Incorporated by Reference.
19
<PAGE>
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