EXHIBIT 99
BGE PRO FORMA FINANCIAL STATEMENTS - GENERATION
ASSET TRANSFER
BACKGROUND
In Exhibit 99 to our Current Report on Form 8-K dated June 30, 2000, we
presented pro forma financial statements for Baltimore Gas and Electric Company
(BGE), a subsidiary of Constellation Energy Group, Inc. (Constellation Energy).
Effective July 1, 2000, BGE transferred its generation assets and related
liabilities to Calvert Cliffs Nuclear Power Plant, Inc. (CCNPP) and
Constellation Power Source Generation, Inc. (CPSG), nonregulated subsidiaries of
Constellation Energy. The pro forma financial statements and description of the
pro forma adjustments reflect these transfers and other financial impacts
surrounding the deregulation of BGE's electric generation business.
At the time the June 30, 2000 Form 8-K was filed, BGE's quarter ended June 30,
2000 results were not available. Accordingly, we have updated the pro forma
financial statements to include our June 30, 2000 results. In addition, the
updated condensed pro forma balance sheet included in this Exhibit reflects the
actual June 30, 2000 book value of the transferred assets and liabilities.
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DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION
The following updated consolidated financial statements for BGE are filed with
this Exhibit:
o Unaudited Condensed Pro Forma Balance Sheet At June 30, 2000, and
o Unaudited Condensed Pro Forma Income Statement for the Year Ended December
31, 1999 and for the Six Month Period Ended June 30, 2000.
The following major assumptions were made in preparing these updated pro forma
financial statements:
o The transfers described above were assumed to occur as of June 30, 2000 for
the purposes of the condensed pro forma balance sheet.
o The transfers described above were assumed to occur as of January 1, 1999
for the purposes of the condensed pro forma income statement for the year
ended December 31, 1999. The transfers were assumed to occur as of January
1, 2000 for the purposes of the condensed pro forma income statement for
the six-month period ended June 30, 2000. In viewing these statements, it
should be recognized that weather conditions can have a great impact on our
results for interim periods. This means that results for interim periods do
not necessarily represent results to be expected for the year.
o The transfer of the generating assets and decommissioning trusts was
assumed to occur at book value and on a non-taxable basis.
o The provisions of the Maryland Public Service Commission's (Maryland PSC)
Restructuring Order are assumed to be effective as of the beginning of each
period presented for the purposes of developing BGE's revenues and electric
purchased fuel and energy expenses included in the condensed pro forma
income statements.
o An effective tax rate of approximately 35% was utilized to develop the
income tax effects of adjustments to the condensed pro forma income
statement for the year ended December 31, 1999. An effective tax rate of
approximately 39.55% was utilized for the six-month period ended June 30,
2000. The difference in the effective tax rate results from the
comprehensive changes in the state and local tax laws that began January 1,
2000. We discuss these comprehensive tax law changes in Note 4 of our 1999
Annual Report on Form 10-K.
These pro forma financial statements have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations or
financial condition which would have actually resulted if the transfer of the
generation assets or other related transactions had been made on the dates or
for the periods presented, or which may result in the future. Further, these pro
forma financial statements have been prepared using information available at the
date of this filing. As a result, certain amounts indicated herein are
preliminary in nature and, therefore, are subject to change in the future.
Please refer to Part II, Item 5 Forward-Looking Statements in this Form 10-Q for
additional factors.
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DESCRIPTION OF PRO FORMA ADJUSTMENTS
The Unaudited Condensed Pro Forma Income Statements and Balance Sheet filed with
this Exhibit reflect the following adjustments:
Income Statements Adjustments
-----------------------------
1. The expected reduction of BGE's revenues to remove $112 million of
interchange and other wholesale sales for the year ended December 31, 1999
($54 million for the six-month period ended June 30, 2000), which will no
longer be a part of its business once electric deregulation occurs.
2. The adjustment of BGE's revenues to reflect the $54 million average, annual
residential rate reduction provided for in the Restructuring Order for the
year ended December 31, 1999 ($26 million for the six-month period ended
June 30, 2000).
3. The anticipated transfer to CCNPP of approximately $164 million of BGE's
revenues that will fund nuclear decommissioning and stranded costs for the
year ended December 31, 1999 ($80 million for the six-month period ended
June 30, 2000).
4. The reversal of BGE's actual electric fuel and purchased energy costs of
approximately $487 million for the year ended December 31, 1999 ($244
million for the six-month period ended June 30, 2000), and its replacement
with the estimated $1,187 million cost of power BGE would have purchased
from CPS to meet its system sales load for the year ended December 31, 1999
($519 million for the six-month period ended June 30, 2000) at standard
offer service rates provided for in the Restructuring Order.
5. The expected elimination of operation and maintenance expenses directly and
indirectly relating to the generation function for the respective period.
6. The anticipated elimination of approximately $165 million of depreciation,
amortization, and nuclear decommissioning expense relating to the
transferred assets for the year ended December 31, 1999 ($85 million for
the six-month period ended June 30, 2000).
7. The removal from results of the nonrecurring impact of $75 million of
amortization expense relating to the $150 million reduction of electric
generation plant under the terms of the Restructuring Order for the year
ended December 31, 1999 ($75 million for the six-month period ended June
30, 2000).
8. The estimated reduction to taxes other than income taxes resulting from the
transfer of the generation function for the respective period.
9. The reduction to other income associated with the elimination of the equity
portion of the allowance for funds used during construction relating to
generation construction projects, equity in the earnings of Safe Harbor
Water Power Corporation, and after-tax earnings on the nuclear
decommissioning trusts.
10. The reflection in other income of approximately $22 million of interest
income expected to be earned on the unsecured promissory notes described in
this Form 10-Q for the year ended December 31, 1999 ($11 million for the
six-month period ended June 30, 2000).
11. The reduction of fixed charges to approximate interest expense expected to
be avoided on transferred tax-exempt debt.
12. The estimated income tax effects using the effective income tax rates for
the respective period.
13. The elimination of the amortization of deferred investment tax credits
transferred along with the associated generation assets.
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Balance Sheet Adjustments
-------------------------
1. The amount of the transfer of fuel stocks including SO2 emission
allowances, materials and supplies, and nuclear fuel inventories relating
to the generation function.
2. The reflection of the unsecured promissory notes described in this Form
10-Q.
3. The amount of the transfer of nuclear decommissioning to CCNPP.
4. The amount of the transfer of BGE's investment in Safe Harbor Water Power
Corporation to CPSG.
5. The amount of the transfers of utility plant in service, accumulated
depreciation reserves, construction work in progress, plant held for future
use, unamortized investment tax credits, and miscellaneous other
generation-related assets and liabilities.
6. The transfer of the approximately $13 million current (included in other
current liabilities) and $21 million non-current (included in other
deferred credits and other liabilities) portions of liabilities accrued in
connection with certain purchased power contracts that will become the
responsibility of the nonregulated generation business.
7. The reflection of the impact on accumulated deferred income taxes of the
transfer of the generation assets and nuclear decommissioning, and the
reflection of the Restructuring Order as described in this Exhibit.
8. The transfer of certain tax-exempt debt and related unamortized discount.
9. The amount of the net reduction in BGE's common shareholder's equity
relating to the other balance sheet adjustments described above.
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Baltimore Gas and Electric Company
Unaudited Condensed Pro Forma Statement of Income
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
As Reported Adjustments Pro Forma
----------- ----------- -----------
(In Millions)
Revenues
<S> <C> <C> <C> <C>
Electric $ 1,090.0 $ (160.0) (1,2,3) $ 930.0
Gas 287.8 - 287.8
Nonregulated 2.3 - 2.3
----------- ----------- -----------
Total Revenues 1,380.1 (160.0) 1,220.1
----------- ------------ -----------
Operating Expenses
Electric fuel and purchased energy 244.1 275.0 (4) 519.1
Gas purchased for resale 143.8 - 143.8
Operations and maintenance 369.5 (200.0) (5) 169.5
Nonregulated - selling, general, and administrative 1.7 - 1.7
Depreciation and amortization 249.8 (160.0) (6,7) 89.8
Taxes other than income taxes 110.6 (41.0) (8) 69.6
----------- ------------ -----------
Total operating expenses 1,119.5 (126.0) 993.5
----------- ------------ -----------
Income from Operations 260.6 (34.0) 226.6
Other Income 5.7 6.0 (9,10) 11.7
----------- ------------ -----------
Income Before Fixed Charges and Income Taxes 266.3 (28.0) 238.3
Fixed Charges 94.4 (7.0) (11) 87.4
----------- ------------ -----------
Income Before Income Taxes 171.9 (21.0) 150.9
----------- ------------ -----------
Income Taxes
Income taxes 69.4 (11.2) (12) 58.2
Investment tax credit adjustments (4.1) 3.0 (13) (1.1)
----------- ------------ -----------
Total income taxes 65.3 (8.2) 57.1
----------- ------------ -----------
Net Income $ 106.6 $ (12.8) $ 93.8
=========== ============ ===========
</TABLE>
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Baltimore Gas and Electric Company
Unaudited Condensed Pro Forma Statement of Income
Twelve Months Ended December 31, 1999
<TABLE>
<CAPTION>
As Reported Adjustments Pro Forma
----------- ------------ -----------
(In Millions)
Revenues
<S> <C> <C> <C> <C>
Electric $ 2,259.5 $ (330.0) (1,2,3) $ 1,929.5
Gas 485.3 - 485.3
Nonregulated 283.5 - 283.5
----------- ------------ -----------
Total Revenues 3,028.3 (330.0) 2,698.3
----------- ------------ -----------
Operating Expenses
Electric fuel and purchased energy 486.8 700.0 (4) 1,186.8
Gas purchased for resale 233.7 - 233.7
Operations and maintenance 728.8 (390.0) (5) 338.8
Nonregulated - selling, general, and administrative 222.1 - 222.1
Depreciation and amortization 427.9 (240.0) (6,7) 187.9
Taxes other than income taxes 224.7 (85.0) (8) 139.7
----------- ------------ -----------
Total operating expenses 2,324.0 (15.0) 2,309.0
----------- ------------ -----------
Income from Operations 704.3 (315.0) 389.3
Other Income 8.4 11.0 (9,10) 19.4
----------- ------------ -----------
Income Before Fixed Charges and Income Taxes 712.7 (304.0) 408.7
Fixed Charges 205.9 (13.0) (11) 192.9
----------- ------------ -----------
Income Before Income Taxes 506.8 (291.0) 215.8
----------- ------------ -----------
Income Taxes
Income taxes 186.9 (108.0) (12) 78.9
Investment tax credit adjustments (8.5) 6.0 (13) (2.5)
----------- ------------ -----------
Total income taxes 178.4 (102.0) 76.4
----------- ------------ -----------
Income Before Extraordinary Loss $ 328.4 $ (189.0) $ 139.4
=========== ============ ===========
</TABLE>
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Baltimore Gas and Electric Company and Subsidiaries
Unaudited Condensed Pro Forma Balance Sheet
June 30, 2000
<TABLE>
<CAPTION>
As Reported Adjustments Pro Forma
----------- ------------ -----------
(In Millions)
ASSETS
Current Assets
<S> <C> <C> <C> <C>
Fuel stocks $ 84.7 $ (52.4)(1) $ 32.3
Materials and supplies 126.5 (99.5)(1) 27.0
Notes receivable, affiliated companies - 366.3 (2) 366.3
Other current assets 396.8 (0.3)(5) 396.5
----------- ------------ -----------
Total current assets 608.0 214.1 822.1
----------- ------------ -----------
Investments And Other Assets
Nuclear decommissioning trust fund 230.3 (230.3)(3) -
Safe Harbor Water Power Corporation 34.5 (34.5)(4) -
Other investments and other assets 169.0 (3.3)(5) 165.7
------------ ------------ -----------
Total investments and other assets 433.8 (268.1) 165.7
------------ ------------ -----------
Utility Plant
Plant in service
Electric 7,157.4 (3,991.2)(5) 3,166.2
Gas 975.2 - 975.2
Common 557.8 (41.1)(5) 516.7
------------ ------------ -----------
Total plant in service 8,690.4 (4,032.3) 4,658.1
Accumulated depreciation (3,572.2) 1,928.1 (5) (1,644.1)
------------ ------------ -----------
Net plant in service 5,118.2 (2,104.2) 3,014.0
Construction work in progress 277.7 (168.5)(5) 109.2
Nuclear fuel (net of amortization) 150.7 (150.7)(1) -
Plant held for future use 12.9 (3.2)(5) 9.7
------------ ------------ -----------
Net utility plant 5,559.5 (2,426.6) 3,132.9
------------ ------------ -----------
Deferred Charges 564.5 (2.8)(5) 561.7
------------ ------------ -----------
Total Assets $ 7,165.8 $ (2,483.4) $ 4,682.4
============ ============ ===========
LIABILITIES AND CAPITALIZATION
Current Liabilities
Current portions of long-term debt $ 503.4 $ - $ 503.4
Other current liabilities 602.0 (42.3)(5,6) 559.7
------------ ------------ -----------
Total current liabilities 1,105.4 (42.3) 1,063.1
------------ ------------ -----------
Deferred Credits And Other Liabilities
Deferred income taxes 997.4 (479.5)(7) 517.9
Deferred investment tax credits 105.4 (79.2)(5) 26.2
Other deferred credits and other liabilities 316.0 (22.4)(5,6) 293.6
------------ ------------ -----------
Total deferred credits and other liabilities 1,418.8 (581.1) 837.7
------------ ------------ -----------
Long-Term Debt
First refunding mortgage bonds of BGE 1,321.7 (8.5)(8) 1,313.2
Other long-term debt of BGE 1,028.4 (269.8)(8) 758.6
Company obligated mandatorily redeemable trust
preferred securities of subsidiary trust
holding solely 7.16% debentures of BGE 250.0 - 250.0
Long-term debt of nonregulated businesses 33.0 - 33.0
Unamortized discount and premium (9.6) 2.1 (8) (7.5)
Current portion of long-term debt (503.4) - (503.4)
------------- ----------- ----------
Total long-term debt 2,120.1 (276.2) 1,843.9
------------- ----------- ----------
BGE Preference Stock Not Subject To Mandatory Redemption 190.0 - 190.0
------------- ----------- ----------
Common Shareholder's Equity 2,331.5 (1,583.8)(9) 747.7
------------ ------------ ----------
Total Capitalization 4,641.6 (1,860.0) 2,781.6
------------ ------------ ----------
Total Liabilities And Capitalization $ 7,165.8 $(2,483.4) $ 4,682.4
============ ============ ==========
</TABLE>
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