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 March 5, 1998
Registrant;
Commission State of Incorporation IRS Employer
File No. Address and Telephone No. Identification No.
1-9760 Atlantic Energy, Inc. 22-2871471
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4500
1-3559 Atlantic City Electric Company 21-0398280
(New Jersey)
6801 Black Horse Pike
Egg Harbor Township, NJ 08234
(609) 645-4100
PAGE
<PAGE>
Item 1. Changes in Control of Company
On August 12, 1996, Delmarva Power & Light Company (DP&L) and
Atlantic Energy, Inc. (Atlantic) announced plans to merge. All
required regulatory approvals were obtained on, or prior to
February 26, 1998 and the merger became effective March 1, 1998.
Atlantic is an investor-owned holding company which owns Atlantic
City Electric Company (ACE), an electric utility, and
subsidiaries engaged in nonutility businesses. ACE serves
approximately 481,000 customers in a 2,700 square mile area in
southern New Jersey. Atlantic's 1997 operating revenues and net
income were $1,102.4 million and $74.4 million, respectively, and
its total assets were $2,723.9 million as of December 31, 1997.
Atlantic's assets consist principally of electric generating,
transmission, and distribution plant and its assets will continue
to be used in the electric business.
Conectiv, a corporation formed to accomplish the merger, holds
the stock of DP&L and ACE under the Public Utility Holding
Company Act of 1935 as of March 1, 1998. Each outstanding share
of DP&L's common stock, par value $2.25 per share, is being
exchanged for one share of Conectiv's common stock, par value
$0.01 per share. Each share of Atlantic's common stock, no par
value per share, is being exchange for 0.75 shares of Conectiv's
common stock and 0.125 shares of Conectiv's Class A common stock,
par value $0.01 per share. Class A common stock gives holders of
Atlantic common stock a proportionately greater opportunity to
share in the growth prospects of, and a proportionately greater
exposure to the uncertainties associated with deregulation of,
the regulated electric utility business of ACE. Earnings
applicable to Class A common stock will be equal to 30% of the
net of (1) earnings attributable to ACE's regulated electric
utility business, as the business existed on August 9, 1996, less
(2) $40 million per year. Earnings applicable to Conectiv common
stock will be the consolidated earnings of Conectiv less earnings
applicable to Class A common stock.
The merger will be accounted for under the purchase method of
accounting, with DP&L as the acquirer. The total consideration
being paid to Atlantic's common stockholders (in the form of
Conectiv common stock and Class A common stock), as measured by
the average daily closing market price of Atlantic's common stock
for the three trading days immediately preceding and the three
trading days immediately following the public announcement of the
merger, is $921.0 million. The consideration paid plus estimated
acquisition costs and liabilities assumed in connection with the
merger are expected to exceed the net book value of Atlantic's
net assets by approximately $200 million, which will be recorded
as goodwill. The goodwill will be amortized over 40 years.
PAGE
<PAGE>
Item 4. Change of Registrant's Independent Accountants
(1) As of March 1, 1998, the date of the aforementioned merger,
Atlantic City Electric Company (ACE) is now a subsidiary of
Conectiv. Pursuant to this change in control the following
hereby applies:
(i) The accounting firm of Deloitte & Touche LLP, Two Hilton
Court, P.O. Box 319, Parsippany, NJ, is hereby dismissed as
independent accountants to ACE.
(ii) For the past two years Deloitte & Touche LLP has not
issued an adverse opinion or a disclaimer of opinion, nor was an
opinion qualified or modified as to uncertainty, audit scope, or
accounting principles on ACE's reports on the financial
statements.
(iii) This decision to change accountants was approved by
the Audit Committee of the Board of Directors of Conectiv acting
on behalf of its subsidiary, ACE.
(iv) Also in the past two years, prior to this dismissal,
there have been no disagreements with Deloitte & Touche LLP on
any matters of accounting principles or practices, financial
statement disclosures, auditing scope or procedures.
(v) During the past two years the accountants have not
advised ACE that (A) the internal controls necessary for the
registrant to develop reliable financial statements did not
exist; (B) that information had come to the accountant's
attention that led them to no longer be able to rely on
management's representations, or that has made the accountant's
unwilling to be associated with the financial statements prepared
by management; (C) the accountant's have not advised ACE of the
need to expand significantly the scope of its audit, or that any
information has come to the accountant's attention that if
further investigated may materially impact the fairness or
reliability of the audit report or the underlying financial
statements or would cause the accountants to be unwilling to rely
on managements representations or to be unwilling to be
associated with the financial statements.
(2) As of March 1, 1998, the date of the change in control, the
accountants hereby appointed by the Audit Committee of the Board
of Directors of Conectiv acting on behalf its subsidiary, ACE,
are Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, Pennsylvania.
PAGE
<PAGE>
Item 5. Other Events
Pursuant to the Merger and Reorganization of Delmarva Power &
Light Company and Atlantic Energy, Inc. which was completed on
March 1, 1998, the Board of Directors of Atlantic City Electric
Company (ACE) has been changed. The following individuals have
been elected as directors to serve until his or her successor is
appointed or his or her earlier resignation or removal.
Atlantic City Electric Company
Howard E. Cosgrove Director/Chairman
Meredith I. Harlacher, Jr. Director
Thomas S. Shaw Director
Barry R. Elson Director
Barbara S. Graham Director
The following individuals have been appointed by the Directors of
ACE to the office opposite their name.
Atlantic City Electric Company
Howard E. Cosgrove Chief Executive Officer
Meredith I. Harlacher, Jr. President and Chief Operating
Officer
Barbara S. Graham Senior Vice President and
Chief Financial Officer
Barry R. Elson Executive Vice President
Thomas S. Shaw Executive Vice President
Louis M. Walters Treasurer and Assistant
Secretary
James E. Franklin II Chief Legal Officer and
Secretary
PAGE
<PAGE>
Item 7 Financial Statements and Exhibits
See Exhibit Index Attached
PAGE
<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.
Atlantic Energy, Inc.
Atlantic City Electric Company
(Registrant)
By: /s/ J. E. Franklin II
J. E. Franklin II
Vice President, Secretary and
General Counsel of Atlantic Energy, Inc.
Senior Vice President, Secretary and
General Counsel of Atlantic City
Electric Company
Date: March 4, 1998
PAGE
<PAGE>
Exhibit Index
16 Letter re change in certifying accountant
99 Letter to Members of the Financial Community
<PAGE>
Exhibit 16
LETTER re CHANGE IN CERTIFYING ACCOUNTANT
March 4, 1998
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 4 of Form 8-K of
Atlantic Energy, Inc. and Atlantic City Electric Company dated
March 4, 1998.
Yours truly,
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Parsippany, New Jersey
<PAGE>
Exhibit 99
March 5, 1998
To Members of the Financial Community:
Effective March 1, 1998, Delmarva Power & Light Company and
Atlantic Energy Inc. formed Conectiv, a new kind of power
company.
With the receipt of SEC approval under the Public Utility
Holding Company Act last week, we are now one family of companies
under Conectiv. We will have a market capitalization of over
$2.3 billion, and will serve over 1 million electric customers
and 100,000 gas customers in Delaware, New Jersey, Maryland and
Virginia. Our regional focus will extend beyond into those
neighboring states in the northeast where we can capitalize on
competitive opportunities for energy, HVAC services, and
telecommunications and continue to provide the excellent customer
care both Atlantic and Delmarva have been long noted for.
We commenced trading on the New York Stock Exchange on
March 2, 1998 under the ticker symbols CIV (Common Stock) and CIV
A (Class A). As we begin our new company, we plan to meet with
the financial community to outline Conectiv s strategic
objectives and the progress we ve made to date. Included below
are some key areas which we plan to cover.
Strategic Focus
Conectiv is committed to creating shareholder value,
measured in terms of top quartile total shareholder return, with
a minimum 5% growth in annual earnings and an overall total
return of at least 12%. We will differentiate ourselves based
upon a focused, competency based strategy; a manageable level of
capital investment required to produce those returns, of which
almost all funds are generated internally; and a management team
with the breadth and depth of experience to manage the portfolio
of Conectiv business assets.
Conectiv will manage its portfolio using three strategic
business groups, which are led by executives with broad
experience: Conectiv Energy Supply, led by Tom Shaw, Executive
Vice President of Conectiv; Conectiv Energy Delivery, led by
Meredith I. Harlacher, Jr., President of Conectiv, and Conectiv
Enterprises, led by Barry Elson, Executive Vice President of
Conectiv. Our regulated delivery and energy supply businesses
generate strong cash flow, and provide more than adequate
coverage of our dividend.
PAGE
<PAGE>
The Enterprises business group includes five retail business
lines: Conectiv Communications (telecommunications); Conectiv
Services (HVAC); Conectiv Energy (retail energy); Conectiv
Thermal Systems (district heating/cooling); and Conectiv
Solutions (energy services). With the exception of retail
energy, these businesses will have higher gross margins, slightly
different measures of value than the utility industry and are
expected to produce revenues of over $750 million by 2000, with a
cumulative capital investment by that time of between $300
million and $400 million.
1997 Successes
During the last year, we have worked in both companies to
bring two organizations together, obtain the needed regulatory
approvals, investing in new processes for competing in
deregulating markets, while achieving significant progress in
forging ahead with our strategy of bringing new products and
services to serve the regional marketplace. 1997 saw significant
progress attained in the Conectiv brand awareness campaign,
increased market share in regional retail pilot electric and gas
programs, the launch of Conectiv Communications as the only
facilities-based local service alternative on the Delmarva
peninsula, and dramatic revenue growth (from $33 million to $95
million on an annual basis) from Conectiv Services through the
acquisition and integration of several additional regional HVAC
contractors.
Looking ahead, we plan to continue to make investments in
these business lines, as well as the Supply and Delivery groups,
with expected consolidated capital and acquisition expenditures
of over $1.5 billion during the five year period. We plan to
fund that growth internally, and will issue new debt securities
primarily to cover scheduled redemptions during that time.
1998 will be a watershed year and contain several key events
which will help mark the beginning of Conectiv. In the first
quarter of 1998, we plan to take a one-time charge for merger-
related costs, which will amount to between $0.33 and $0.36 per
share of Conectiv Common Stock. We are committed to achieving
the merger synergies which have been identified. We truly expect
that additional savings can be gained, and have developed a "100
day plan" to drive the staffing levels where they should be and
achieve our vision of producing value for our investors.
Critical to Conectiv's future success is the outcome of the
restructuring proceedings now pending in New Jersey, to be
followed by proceedings in Delaware and Maryland in the next few
years. We plan to aggressively pursue favorable outcomes in
those states so that our generation assets are free to compete in
the energy markets.
<PAGE> <PAGE>
Continued growth of Conectiv Enterprises--our retail
businesses-- is also of paramount importance during 1998 and
1999. Those businesses are in a start-up mode and we expect the
pressure on earnings to subside as these businesses continue to
grow. We believe that our investments in these new businesses
made during 1997, funded largely by Delmarva, will pay off over
the long term.
As we go forward as Conectiv in 1998, we plan to provide you
with periodic updates on selected performance measures. Those
measures are in the areas of merger synergies, electric
restructuring, and growth and profitability measures in our
Enterprises business group, which we believe will demonstrate the
progress we are making in those critical areas.
We look forward to speaking with you about Conectiv.
Sincerely,
/s/ Barbara S. Graham
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
The Private Securities Litigation Reform Act of 1995 (Litigation
Reform Act) provides a new safe harbor for forward looking
statements to encourage such disclosures without the threat of
litigation, provided those statements are identified as forward-
looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results
to differ materially from those projected in the statement.
Forward looking statements are made in this report. Such
statements are based on management s beliefs as well as
assumptions made by and information currently available to
management. When used herein, the words "will", "anticipate",
"estimate", "expect", "objective" and similar expressions are
intended to identify forward-looking statements. In addition to
any assumptions, and other factors referred to specifically in
connection with such forward-looking statements, factors that
could cause actual results to differ materially from those
contemplated in any forward looking statements include, among
others, the following: deregulation and the unbundling of energy
supplies and services; an increasingly competitive energy
marketplace; sales retention and growth; federal and state
regulatory actions; operating restrictions; and credit market
concerns. The Company undertakes no obligation to publicly
update or revise any forward looking statements, whether as a
result of new information, future events or otherwise. The
foregoing review of factors pursuant to the Litigation Reform Act
should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior
to the effective date of the Litigation Reform Act.
<PAGE>
<TABLE>
Conectiv Sources and Uses of Cash: 1998-2002
<CAPTION>
Conectiv
5-Year
1998 1999 2000 2001 2002 Total
<S> <C> <C> <C> <C> <C> <C>
Cash Requirements
Capital and Acquisition
Expenditures $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
Changes in Working Capital 24,803 15,482 26,048 26,202 23,090 115,625
Total Cash Required $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
Internally Generated Funds $281,785 $263,120 $296,573 $334,441 $381,732 $1,557,651
External Financings 134,907 149,732 79,398 68,752 18,198 450,987
Redemption of Securities (101,543) (62,367) (48,727) (55,096) (110,745) (378,478)
Total Sources of Cash $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
Ticker Symbol
CIV
</TABLE>
PAGE
<PAGE>
<TABLE>
Capital and Acquisition Expenditures: 1998-2002
<CAPTION>
Conectiv
5-Year
1998 1999 2000 2001 2002 Total
<S> <C> <C> <C> <C> <C> <C>
Total Capital & Acquisition Expenditures* $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
Energy Supply(1) $53,961 $82,660 $59,288 $96,081 $61,729 $353,719
Energy Delivery (1) $131,067 $142,207 $147,994 $136,267 $134,552 $692,087
Enterprises $97,818 $102,636 $86,414 $82,047 $62,314 $431,229
Conectiv Services $31,510 $27,740 $2,923 $1,174 $1,183
Conectiv Communications $32,770 $34,201 $38,609 $36,606 $25,091
Conectiv Solutions $7,276 $40,211 $28,278 $31,718 $36,001
Conectiv Energy $945 $484 $121 $209 $39
Conectiv Thermal (2) $25,317 16,483 $12,340
Enertech $7,500 $7,500 $7,500 $7,500 $7,500 $37,500
NOTE: (1) Energy Supply and Energy Delivery include one-half of common plant expenditures
(2) Represents budgeted common equity contribution
*Excludes AFUDC
</TABLE>
<PAGE>
Ticker Symbol
CIV
