Pepco – Conectiv merger expected to close in third quarter 2002

WASHINGTON, June 13, 2002 — Potomac Electric Power Company (Pepco) announced recently that it expects its planned merger with Conectiv to close in the third quarter of 2002.

The company had previously reported that it hoped to close the merger by the end of the second quarter.

Said Dennis Wraase, Pepco President and Chief Operating Officer, “We have now accomplished nearly all necessary approvals to complete the merger, and while it has taken slightly longer than we anticipated, we have every indication that the few remaining approvals will be obtained in time to close the merger in the third quarter.”

Approvals by regulators in New Jersey and the U.S. Securities and Exchange Commission remain to be obtained before the two companies are combined.

Pepco and Conectiv have already received approval from regulatory commissions in Delaware, the District of Columbia, Maryland, Pennsylvania and Virginia, and from the Federal Energy Regulatory Commission. Additionally, the proposed merger has been cleared by the Federal Trade Commission and the U.S. Department of Justice. In New Jersey, an Administrative Law Judge has recommended approval of a merger settlement agreement to the Board of Public Utilities.

The merger, announced Feb. 12, 2001, calls for Pepco to acquire Conectiv for a combination of cash and stock valued at approximately $2.2 billion. The new company will also assume approximately $2.8 billion of Conectiv’s outstanding debt for a total transaction value of almost $5 billion.

In the merger announcement, the companies stated that the merger would be immediately accretive to earnings and earnings growth was projected in the 6 percent to 8 percent range.

Said Andrew W. Williams, Pepco Senior Vice President and Chief Financial Officer, “We remain on track to accomplish this. Of course, the later in the year the merger closes, the less impact the transaction will have on earnings in this calendar year. We still expect that Pepco will maintain its traditional earnings levels through the transition and that growth after the merger will be higher than on a stand alone basis.”

During the last five years, Pepco has had annual utility earnings in the $1.65 to $1.75 per share range, after eliminating all non-recurring items, with an additional 10 to 15 cents per share from unregulated subsidiaries.

The merger of Pepco, based in Washington, and Wilmington, Del.-based Conectiv will create the largest electricity delivery company in the mid- Atlantic region with a transmission and distribution network serving 1.8 million customers in a 10,000-square-mile area. The two utilities will continue operations as separate companies under a new corporate parent, Pepco Holdings, Inc., with headquarters in Washington. The combined company will generate most of its earnings from its traditional regulated utility delivery business. A smaller diversified unregulated energy portfolio is expected to enhance future growth.

Pepco ( ) is an investor-owned company that delivers electricity to more than 700,000 customers in Washington, D.C. and the Maryland suburbs. Conectiv ( ) is focused on two core energy businesses. Conectiv Power Delivery provides regulated energy delivery services to more than one million customers in N.J., Del., Md., and Va. Conectiv Energy manages a growing portfolio of “mid-merit” power plants that can respond quickly to changes in the demand for power with the PJM power pool.


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