Exelon and PSEG to join forces

Dec 20, 2004 01:00 AM

Exelon is acquiring Public Service Enterprise Group (PSEG) in a $ 12 bn stock deal that would create the nation's largest power generation company with customers in Illinois, New Jersey and Pennsylvania.
"We will be the company that keeps over 18 mm people warm in the winter and cool in the summer," John Rowe, chairman, president and CEO of Exelon, said in announcing the deal that will create Exelon Electric & Gas.

Roughly 1,400 jobs are expected to be cut over the next two years, part of the effort to achieve an estimated half-billion dollars in savings, a PSEG spokesman said. The two companies currently employ 28,500 people.
The new company would have $ 79 bn in assets, with $ 27 bn in annual revenues and $ 3.2 bn in annual profit, the companies said. Shares of both companies finished the day higher, despite some concerns that regulatory approval might be an issue for the deal, which is expected to close in 12 to 15 months.

Chicago-based Exelon and Newark-based PSEG said both of their boards had unanimously approved the move. David Schanzer, a utility analyst at Janney Montgomery Scott, foresaw no problem with regulators in Illinois and Pennsylvania, where Exelon has customers, but said New Jersey typically was sceptical of out-of-state companies controlling a utility that serves its residents.
"The question is whether the feds and state of New Jersey will put up with it," Schanzer said. "If they were caught by surprise, this could be a little bit more of a difficult process."

Federal regulators would be concerned about the market power of the combined company, Schanzer said.
"This is going to be the 800-pound gorilla," he said. The deal, if approved, also might encourage other utilities to consider merging to compete, he said.
Exelon and PSEG said they expected the deal to create immediate cost savings, and provide improved service because of efficiencies with generation, transmission, distribution and power marketing. They also claimed there will be greater earnings predictability.

The new company will be led by Rowe, Exelon's current top executive. Its board will be comprised of 12 members nominated by Exelon and six members nominated by PSEG. The new company would be the nation's largest power generator, with approximately 52,000 MW of domestic capacity, including long-term contracts, the companies said.
The new company's headquarters will be in Chicago and its energy trading operations will be in Pennsylvania.

Source: The Associated Press
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