EXHIBIT 99
BGE PRO FORMA FINANCIAL STATEMENTS - GENERATION
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ASSET TRANSFER
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BACKGROUND
In our March 31, 2000 Quarterly Report on Form 10-Q, 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 certain generation assets and 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. The exact amount of these transfers will
be based on the actual book value at June 30, 2000, which has not been
determined at the date of this filing.
Since our March 31, 2000 Quarterly Report on Form 10-Q, there has been one new
development in the assumptions used in these pro forma financial statements.
Accordingly, we are providing revised pro forma financial statements to reflect
this known change in the assumptions. This change results from the reduction of
the level of unsecured promissory notes that BGE received from CPSG from $426
million, as disclosed in our March 31, 2000 Quarterly Report on Form 10-Q, to
approximately $366 million.
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DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION
The following revised consolidated financial statements for BGE are filed with
this Exhibit:
o Unaudited Condensed Pro Forma Balance Sheet At March 31, 2000, and
o Unaudited Condensed Pro Forma Income Statement for the Year Ended December
31, 1999 and for the Three Month Period Ended March 31, 2000.
The following major assumptions were made in preparing these revised pro forma
financial statements:
o The transfers described above were assumed to occur as of March 31, 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 three-month period ended March 31, 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 three-month period ended March
31, 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.
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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
($23 million for the three-month period ended March 31, 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 ($13 million for the three-month period ended
March 31, 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 ($40 million for the three-month period ended
March 31, 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 ($119
million for the three-month period ended March 31, 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 ($267 million for the three-month period ended March 31,
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 ($42.5 million for
the three-month period ended March 31, 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 ($37.5 million for the three-month period ended
March 31, 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 Exhibit for the year ended December 31, 1999 ($6 million for the
three-month period ended March 31, 2000).
11. The reduction of fixed charges to approximate interest expense expected to
be avoided on the 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 expected 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 Exhibit
along with the approximate amount of related accrued interest.
3. The expected amount of the transfer of nuclear decommissioning to CCNPP.
4. The expected amount of the transfer of BGE's investment in Safe Harbor
Water Power Corporation to CPSG.
5. The expected amount of the transfer of generating assets as described in
this Exhibit including utility plant in service, accumulated depreciation
reserves, construction work in progress, plant held for future use, and
unamortized investment tax credits.
6. The elimination of the remaining $37.5 million unamortized balance of the
regulatory asset relating to the $150 million reduction of electric
generation plant that will be fully amortized as of June 30, 2000 under the
terms of the Restructuring Order.
7. The reduction to current liabilities from eliminating approximately $4
million of accrued interest relating to the transferred tax-exempt debt
described in this Exhibit.
8. The transfer of the approximately $20 million current (included in other
current liabilities) and $9 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.
9. The reflection of the approximate 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.
10. The transfer of the tax-exempt debt as described in this Exhibit.
11. The anticipated 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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FORWARD-LOOKING STATEMENTS
We make statements in this Exhibit that are considered forward-looking
statements within the meaning of the Securities Exchange Act of 1934. Sometimes
these statements will contain words such as "believes," "expects," "intends,"
"plans," and other similar words. These statements are not guarantees of BGE's
future performance and are subject to risks, uncertainties, and other important
factors that could cause its actual performance or achievements to be materially
different from those projected. These risks, uncertainties, and factors include,
but are not limited to:
o general economic, business, and regulatory conditions,
o energy supply and demand,
o competition,
o federal and state regulations,
o availability, terms, and use of capital,
o environmental issues,
o weather,
o implications of the Restructuring Order issued by the Maryland PSC
including the outcome of the Mid-Atlantic Power Supply Association's
appeals of the Order as discussed in Item 5. Other Events of this Report on
Form 8-K,
o loss of revenues due to customers choosing alternate suppliers,
o inability to recover all costs associated with providing electric retail
customers service during the electric rate freeze period, and
o implications from the transfer of BGE's generation assets to nonregulated
subsidiaries of Constellation Energy.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Please see BGE's periodic reports filed with the SEC
for more information on these factors. These forward-looking statements
represent our estimates and assumptions only as of the date of this report.
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<CAPTION>
Baltimore Gas and Electric Company
Unaudited Condensed Pro Forma Statement of Income
Three Months Ended March 31, 2000
(Revised As Of July 7, 2000)
As Reported Adjustments Pro Forma
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(In Millions)
Revenues
<S> <C> <C> <C> <C>
Electric $ 524.6 $ (76.0) (1,2,3) $ 448.6
Gas 195.1 - 195.1
Nonregulated 1.0 - 1.0
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Total Revenues 720.7 (76.0) 644.7
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Operating Expenses
Electric fuel and purchased energy 119.4 148.0 (4) 267.4
Gas purchased for resale 103.0 - 103.0
Operations and maintenance 177.6 (95.0) (5) 82.6
Nonregulated - selling, general, and administrative 0.6 - 0.6
Depreciation and amortization 126.1 (80.0) (6,7) 46.1
Taxes other than income taxes 60.1 (21.0) (8) 39.1
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Total operating expenses 586.8 (48.0) 538.8
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Income from Operations 133.9 (28.0) 105.9
Other Income 3.3 3.0 (9,10) 6.3
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Income Before Fixed Charges and Income Taxes 137.2 (25.0) 112.2
Fixed Charges 47.5 (3.0) (11) 44.5
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Income Before Income Taxes 89.7 (22.0) 67.7
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Income Taxes
Income taxes 37.5 (9.0) (12) 28.5
Investment tax credit adjustments (2.0) 1.0 (13) (1.0)
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Total income taxes 35.5 (8.0) 27.5
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Net Income $ 54.2 $ (14.0) $ 40.2
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Baltimore Gas and Electric Company
Unaudited Condensed Pro Forma Statement of Income
Twelve Months Ended December 31, 1999
(Revised As Of July 7, 2000)
As Reported Adjustments Pro Forma
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(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
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Total Revenues 3,028.3 (330.0) 2,698.3
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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
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Total operating expenses 2,324.0 (15.0) 2,309.0
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Income from Operations 704.3 (315.0) 389.3
Other Income 8.4 11.0 (9,10) 19.4
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Income Before Fixed Charges and Income Taxes 712.7 (304.0) 408.7
Fixed Charges 205.9 (13.0) (11) 192.9
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Income Before Income Taxes 506.8 (291.0) 215.8
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Income Taxes
Income taxes 186.9 (108.0) (12) 78.9
Investment tax credit adjustments (8.5) 6.0 (13) (2.5)
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Total income taxes 178.4 (102.0) 76.4
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Income Before Extraordinary Loss $ 328.4 $ (189.0) $ 139.4
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Baltimore Gas and Electric Company and Subsidiaries
Unaudited Condensed Pro Forma Balance Sheet
March 31, 2000
(Revised As Of July 7, 2000)
As Reported Adjustments Pro Forma
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ASSETS (In Millions)
Current Assets
<S> <C> <C> <C> <C>
Fuel stocks $ 69.6 $ (60.0)(1) $ 9.6
Materials and supplies 138.6 (100.0)(1) 38.6
Notes receivable, affiliated companies - 366.0 (2) 366.0
Interest receivable, affiliated companies - 4.0 (2) 4.0
Other current assets 355.9 - 355.9
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Total current assets 564.1 210.0 774.1
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Investments And Other Assets
Nuclear decommissioning trust fund 222.7 (222.7)(3) -
Safe Harbor Water Power Corporation 34.5 (34.5)(4) -
Other investments and other assets 161.9 - 161.9
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Total investments and other assets 419.1 (257.2) 161.9
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Utility Plant
Plant in service
Electric 7,123.4 (3,980.0)(5) 3,143.4
Gas 970.2 - 970.2
Common 562.2 (45.0)(5) 517.2
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Total plant in service 8,655.8 (4,025.0) 4,630.8
Accumulated depreciation (3,522.1) 1,870.0 (5) (1,652.1)
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Net plant in service 5,133.7 (2,155.0) 2,978.7
Construction work in progress 241.1 (145.0)(5) 96.1
Nuclear fuel (net of amortization) 123.4 (123.4)(1) -
Plant held for future use 12.9 (3.2)(5) 9.7
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Net utility plant 5,511.1 (2,426.6) 3,084.5
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Deferred Charges 639.8 (37.5)(6) 602.3
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Total Assets $ 7,134.1 $ (2,511.3) $ 4,622.8
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LIABILITIES AND CAPITALIZATION
Current Liabilities
Current portions of long-term debt $ 543.9 $ - $ 543.9
Other current liabilities 509.8 (24.0)(7,8) 485.8
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Total current liabilities 1,053.7 (24.0) 1,029.7
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Deferred Credits And Other Liabilities
Deferred income taxes 1,010.4 (470.0)(9) 540.4
Deferred investment tax credits 107.5 (82.0)(5) 25.5
Other deferred credits and other liabilities 309.1 (9.0)(8) 300.1
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Total deferred credits and other liabilities 1,427.0 (561.0) 866.0
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Long-Term Debt
First refunding mortgage bonds of BGE 1,321.7 - 1,321.7
Other long-term debt of BGE 1,068.9 (278.0)(10) 790.9
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 32.0 - 32.0
Unamortized discount and premium (10.1) - (10.1)
Current portion of long-term debt (543.9) - (543.9)
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Total long-term debt 2,118.6 (278.0) 1,840.6
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BGE Preference Stock Not Subject To Mandatory Redemption 190.0 - 190.0
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Common Shareholder's Equity 2,344.8 (1,648.3)(11) 696.5
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Total Capitalization 4,653.4 (1,926.3) 2,727.1
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Total Liabilities And Capitalization $ 7,134.1 $ (2,511.3) $ 4,622.8
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