Financing U-1
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As filed with the Securities and Exchange Commission on August 15, 2001
File No. 1.070-09693
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________
AMENDMENT NO. 5
(Third Post-Effective)
TO
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________________
Exelon Corporation
(and Subsidiaries Listed on Signature Page Hereto)
10 South Dearborn Street
37th Floor
Chicago, IL 60603
(Name of company filing this statement and address of principal executive
offices)
________________________________________________________________________________
Randall E. Mehrberg
Senior Vice President and General Counsel
Exelon Corporation
10 South Dearborn Street
37th Floor
Chicago, IL 60603
(Name and address of agent for service)
_________________________________
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application-Declaration to:
William J. Harmon
Jones, Day, Reavis & Pogue
77 West Wacker
Suite 3500
Chicago, IL 60601
(312) 782-3939
wjharmon@jonesday.com
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TABLE OF CONTENTS
PAGE
A. Summary of Request............................................... 1
B. Exelon Financial Condition....................................... 2
C. Request to Release Jurisdiction on Financing Authority........... 5
D. Request to Release Jurisdiction on EWG/FUCO Aggregate Limitation. 6
1. Exelon's existing EWG is providing a positive contribution
to earnings.................................................. 7
2. Risk Analysis and Mitigation................................ 7
3. Financial Ratios............................................ 7
4. State Commissions........................................... 9
5. Other Information........................................... 10
E. Refinancing and/or Assumption of Pollution Control Obligations... 10
F. Request to Release Jurisdiction over Short-Term Debt Limit....... 12
G. Genco Short-Term Debt Limitation................................. 12
H. Clarification Regarding Refinancing.............................. 12
I. Exemption from Section 13(b)..................................... 13
J. Money Pool....................................................... 13
K. Minor Clarifications............................................. 14
L. Exhibit.......................................................... 14
Exelon Corporation, a Pennsylvania Corporation ("Exelon"), filed an
Application-Declaration on Form U-1 with the Securities and Exchange Commission
(the "Commission") in this file on June 12, 2000, as amended through Amendment
No. 4 (Second Post-Effective)(as so amended, the "Original Financing U-1"). The
purpose of this Amendment No. 5 (Third Post-Effective) is to provide additional
information regarding the financing transactions approved by the Commission by
Orders in this matter on November 2, 2000 (Holding Co. Act Release No. 35-27266)
and December 8, 2000 (Holding Co. Act Release No. 35-27296) (collectively, the
"Prior Order"). Capitalized terms used herein are used with the same meanings
as in the Original Financing U-1.
Exelon filed an Application-Declaration on Form U-1 (File No. 70-09645) on
March 16, 2000 (as amended, the "Merger U-1") seeking approvals relating to the
acquisition by Exelon of all the common stock of Commonwealth Edison Company
("ComEd"), an electric utility company, and formerly a subsidiary of Unicom
Corporation ("Unicom"); of PECO Energy Company ("PECO"), an electric and gas
utility company; of Exelon Generation Company, LLC ("Genco"), to which the
generating assets of ComEd and PECO were transferred, each of which is an
electric utility company; and, indirectly of the public utility subsidiaries of
ComEd and PECO. The Merger (as defined in the Merger U-1) was completed October
20, 2000, subsequent to the Commission issuing its order approving the Merger on
October 19, 2000 (Holding Co. Act Release No. 35-27256; 70-9645). Exelon filed
its notice of intent to register as a holding company under the Act on October
20, 2000.
Exelon and its Subsidiaries sought approval of the Commission through the
Original Financing U-1 for approval of certain financing transactions. In the
November 2 Order, the Commission reserved jurisdiction over several requests
including the request that Exelon be permitted to have an aggregate investment
in EWGs and FUCOs of $5.5 billion. The November 2 Order approved an aggregate
investment of up to $2 billion and reserved jurisdiction over the balance of the
request. Exelon has previously requested that the Commission release
jurisdiction over the request for an additional $2 billion in aggregate
investment in EWGs and FUCOs and by Supplemental Order dated December 8, 2000
(the "December 8 Order and together with the November 2 Order, the "Prior
Orders") the Commission approved such request so that the aggregate investment
in EWGs and FUCOs now authorized is $4 billion. In other respects the November
2 Order remains unchanged.
A. Summary of Request
Exelon hereby requests the following:
1. that the Commission release jurisdiction over Exelon's
request for financing authority in the amount of an
additional $4 billion, thus Exelon's total new financing
permitted though the Authorization Period (exclusive of
certain refinancings as described herein) would not
exceed $8 billion during the Authorization Period (March
31, 2004), which is the full amount originally
requested;
2. that the Commission release jurisdiction over the matter
of Exelon's aggregate investment in EWGs and FUCOs in
the amount of an additional $1.5 billion, thus Exelon's
aggregate investment would not exceed $5.5 billion
during the Authorization Period, which is the full
amount originally requested;
3. that the Commission clarify the approval of Genco to
become obligated for certain pollution control
obligations of PECO and ComEd;
4. that the Commission release jurisdiction over Exelon's
request that it eliminate the requirement that Exelon's
short-term indebtedness outstanding during the
Authorization Period not exceed $3 billion;
5. that the Commission clarify in certain respects the
treatment of refinancings under the aggregate financing
limitation; and 6. that the Commission clarify certain
other aspects of the Prior Order as described below.
B. Exelon Financial Condition
Exelon is a financially sound company with an investment grade rating from
the major rating agencies. Exelon's principal utility operating subsidiaries --
ComEd and PECO -- are financially sound and each have investment grade ratings
from major national rating agencies.
-2-
The Exelon system's ratings as of May 4, 2001 from Standard & Poor's,
Moody's and FitchIBCA are as follows:/1/
Company and
type of rating S&P Moody's Fitch
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Exelon -- -- --
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. Corporate A- N/A N/A
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. Unsecured BBB+ Baa2 BBB+
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. Commercial A-2 P-2 F2
Paper
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ComEd -- -- --
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. Secured A- A3 A-
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. Unsecured BBB+ Baa1 BBB+
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. Preferred Stock BBB baa2 BBB
and Trust
Securities
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. Commercial A-2 P-2 F2
Paper
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. Transitional AAA Aaa AAA
Trust Notes
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PECO -- -- --
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. Secured A A2 A
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. Unsecured BBB+ A3 A-
-------------------------------------------------------------------------------
. Preferred Stock BBB baa1 BBB+
and trust
Securities
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. Commercial A-2 P-1 F1
Paper
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. Transitional AAA Aaa AAA
Trust Notes
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Exelon Generation -- -- --
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. Unsecured A- Baa1 BBB+
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Exelon has a sound capital structure. At March 31, 2001, Exelon's
consolidated common equity as a percentage of Consolidated Capitalization
(common equity, preferred stock and long-term and short-term debt, including
current maturities of long-term debt) was 31.6%. Details regarding Exelon's
capitalization are shown in the following table:
----------------
/1/ S&P (corporate rating); Moody's (issuer rating); Fitch (senior unsecured
implied rating).
-3-
CONDENSED CONSOLIDATED CAPITAL STRUCTURE
(in Millions)
As of March 31, 2001
Capital Structure
Amount Percentage
Common Equity (includes Retained Earnings of $570) $ 7,357 31.60%
Preferred and Preference Stock -- --
Company Obligated Mandatorily Redeemable Preferred
Securities 630 2.71%
Long-Term Debt
Securitization Bonds 7,237 31.09%
Other 5,653 24.28%
Current Maturities of LTD 74 3.32%
Total Long-Term Debt 13,664 58.69%
Short-Term Debt 1,630 7.00%
Total Capital Structure $23,281 100.0%
======= =====
Likewise, ComEd and PECO have strong capital structures.
As of March 31, 2000
in Millions)
ComEd ComEd PECO PECO
Amounts Percentages Amounts Percentages
Common Equity (includes Retained
Earnings of $216 and $272 for ComEd
and PECO, respectively) $ 4,952 39.82% $ 150 2.14%
Preferred and Preference Stock 7 .06% 137 1.95%
Company Obligated Mandatorily
Redeemable Preferred Securities 328 2.64% 165 2.35%
Long-Term Debt
Securitization Bonds 2,536 20.39% 4,701 67.04%
Other 4,267 34.31% 1,110 15.83%
Current Maturities of LTD 346 2.78% 415 5.92%
Total Long-Term Debt 7,149 57.49% 6,226 88.79%
Short-Term Debt -- -- 334 4.76%
Total Capital Structure $12,436 100.0% $7,012 100.0%
======= ===== ====== =====
-4-
Effective January 1, 2001, Exelon contributed to PECO a $2.0 billion
receivable, payable by Exelon, for the purpose of funding future tax payments
resulting from collection of competitive transition charges. This receivable is
reflected as a reduction of shareholders' equity in PECO's balance sheets. This
non-interest bearing receivable is expected to be settled over the years 2001
through 2010 in conjunction with the payment of the taxes resulting from the
collection of competitive transition charges./2/ Excluding the effect of this
reduction and excluding securitization debt from capitalization, the equity
component of PECO capitalization at March 31, 2001 would be 50%. Excluding the
effect of this reduction and including securitization debt in capitalization,
the equity component of PECO capitalization at March 31, 2001 would be 24%.
Exelon renews its commitment, made in the Original Financing U-1, that it
will achieve common equity (as reflected on the balance sheets contained in its
most recent 10-K or 10-Q filed with the Commission pursuant to the 1934 Act) as
a percentage of Consolidated Capitalization of at least 30% by December 31, 2002
and, at all times thereafter during the Authorization Period, its common equity
so calculated will be at least 30% of its Consolidated Capitalization and it
will maintain at least an investment grade corporate or senior debt rating by at
least one nationally recognized rating agency.
Further, ComEd renews its commitment, made in the Original Financing U-1,
that it will maintain common equity of at least 30% of its capitalization
(calculated in the same manner as described above) and at least an investment
grade senior debt rating by at least one nationally recognized rating agency./3/
PECO requests that the Commission approve a revised commitment that it will
continue to improve its equity ratio as securitization bonds are paid down and
as the January 1, 2001 receivable referred to above is settled.
C. Request to Release Jurisdiction on Financing Authority
Exelon requests that the Commission release jurisdiction over the remaining
$4 billion of total financing authority. Thus, Exelon's total financing
authority through the Authorization Period would be $8 billion (in addition to
refinancing as described below). Exelon contends that the additional financing
authority sought herein will not adversely affect its financial condition. See
Amended Exhibit K-1, filed herewith.
The level of financing requested by Exelon is commensurate with the levels
approved by the Commission in recent cases. The following table gives several
examples of recent decisions
_______________________
/2/ For additional information see the Exelon Form 10-Q for the quarter
ended March 31, 2001 including Note 12 of Combined Notes To Condensed
Consolidated Financial Statements.
/3/ As noted in the Original Financing U-1, the consequence of failing to
maintain an investment grade rating or common equity of at least 30% of
Consolidated Capitalization when required is that Exelon and its Subsidiaries
(or if such failure were only by ComEd, such company) would not be authorized to
issue securities in a transaction subject to Commission approval except for
securities which would result in an increase in such common equity percentage or
restoration of such rating. Exelon represents that it also will be in compliance
with its Modified Rule 53 Test as described in the Original Financing U-1 and
all other commitments made therein.
-5-
and shows that the request of Exelon represents a comparable or smaller
percentage of growth in capitalization than several of the other cases.
Company Approved Additional Pro Forma Common Pro Forma Total Existing % Increase to Total
Financing Equity as % of Capitalization Capitalization
($ Billions) Existing ($Billions) Represented by Request
Capitalization
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Progress $ 5.0 36.2% $14.0 35.7%
Energy/4/
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Scottish $ 7.5 58.3% $18.7 40.1%
Power/5/
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PowerGen/6/ $ 6.0 29.2% $12.6 47.6%
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NiSource/7/ $14.0 28.5% $12.0 116.7%
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Exelon $ 8.0 31.6% $23.3 34.3%
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D. Request to Release Jurisdiction on EWG/FUCO Aggregate Limitation
Exelon requests that the Commission release jurisdiction over the remaining
$1.5 billion of aggregate investment in EWGs and FUCOs. In support of this
request, Exelon presents the following.
At March 31, 2001, the consolidated amount of Exelon's aggregate investment
in EWGs and FUCOs as that term is defined in Rule 53 was $770 million. At March
31, 2001, the consolidated retained earnings of Exelon was $570 million./8/ This
amount is insufficient to meet Exelon's business plans or its current
investment. Accordingly, Exelon renews its request that it be allowed to invest
up to $5.5 billion in EWGs and FUCOs ($1.5 billion over the $4 billion
investment currently authorized). Exelon will continue to satisfy all of the
conditions of Rule 53(a) except for clause (1) thereof, which requires that the
aggregate at risk investment of the
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/4/Progress Energy Corp., Holding Co. Act Release No. 35-27297 (Dec. 12,
2000). Pro forma total existing capitalization taken from S-4 Registration
Statement (File No. 333-40836) filed July 5, 2000.
/5/Scottish Power plc, Holding Co. Act Release No. 35-27290 (Dec. 6, 2000).
/6/PowerGen plc, Holding Co. Act Release No. 35-27291(Dec. 6, 2000). Total
existing capitalization taken from U-5-B filed March 9, 2001 derived by adding
amounts in U.S. dollars and U.S. GAAP as follows: shareholder's funds, $3.746
billion; short-term debt, $3.440 billion; long-term debt, $5.420 billion.
/7/NiSource, Inc., Holding Co. Act Release No. 35-27265 (Nov. 1, 2000). The
requested $14 billion included $10 billion of indebtedness. This requested
amount is in addition to the $6 billion of additional financing for the Columbia
Gas companies previously approved by the Commission. See Columbia Energy Group,
Holding Co. Act Release No. 35-27035 (June 8, 1999). NiSource received approval
to keep its common equity ratio no lower than 28.5% for two years and thereafter
at not less than 30%. Pro forma total existing capitalization taken from S-4
Registration Statement (File No. 333-33896) filed April 24, 2000.
/8/The retained earnings is at December 31, 2000 and does not average the
four most recent quarters. Because of the accounting adjustments resulting from
the merger and other factors, a four quarter average would not be meaningful.
-6-
registered holding company in EWGs and FUCOs not exceed 50% of the holding
company system's consolidated retained earnings./9/
1. Exelon's existing EWG is providing a positive contribution to
earnings.
The investment in EWGs has a history of positive impact on operating
results. The equity in the earnings of AmerGen and Sithe as of the year ended
December 31, 2000 was $4 million and the equity in earnings of AmerGen and Sithe
as of the quarter ended March 31, 2001 was $26 million.
2. Risk Analysis and Mitigation
Exelon has a comprehensive risk analysis and mitigation process in place.
This process was described in detail in Amendment No. 4 to this Application-
Declaration filed December 4, 2000. Exelon is aware of proposed Rule 55 which
would codify the Commission's practice of requiring holding companies to
institute a risk management process./10/ Exelon will comply with the
requirements of Rule 55 if it is adopted.
3. Financial Ratios
Growth in Retained Earnings. Exelon's pro forma retained earnings
at June 30, 2000 were $89 million. Actual retained earnings at December 31, 2000
were $332 million, a 273% increase and at March 31, 2001 were $570 million, a
72% increase over December. Exelon's net income increased $141 million, or 23%,
in 2000 over 1999 before giving effect to extraordinary items, the cumulative
effect of a change in accounting principle and non-recurring items.
Financial Ratios. Exelon's proposed $5.5 billion aggregate
investment in EWGs would represent a conservative and reasonable commitment of
Exelon capital for a company the size of Exelon, based on various financial
ratios at March 31, 2001. For example, investments of this amount would be equal
to only approximately:
-------------------------
/9/The other requirements of Rule 53(a) provide (1) that the holding
company keep certain books and records relating to EWGs and FUCOs in accordance
with generally accepted accounting principles, (2) limitations on the number of
employees of a domestic public utility company in the holding company system who
may provide services for the EWGs and FUCOs and (3) for the holding company to
make certain filings. Exelon undertakes to comply with the forgoing
requirements. However, as noted in the Merger U-1, Genco, a "domestic public
utility" will seek authority to provide certain services to EWGs and FUCOs. In
the Original Financing U-1, Exelon indicated that its pro forma retained
earnings at June 30, 2000 was $89 million. Adding to this figure the $667
million of retained earnings of ComEd that were eliminated in the merger because
of push down accounting, the proposed $4 billion of aggregate investment
approved in the Prior Order was 529% of this hypothetical retained earnings of
$756 million. An aggregate investment of $4 billion would be 4,494% of the GAAP
pro forma retained earnings of $89 million. An aggregate investment of $5.5
billion is 1,656% of Exelon's actual retained earnings at December 31, 2000 of
$332 million. If the hypothetical ComEd retained earnings were added, an
aggregate investment of $5.5 billion would be 550% of such retained earnings of
$1 billion.
/10/Holding Co. Act Release No. 35-27342 (Feb. 7, 2001).
-7-
23.6% of Exelon's total consolidated capitalization ($23.3 billion),/11/
42.3% of consolidated net utility plant ($13 billion),
15.9% of total consolidated assets ($34.6 billion), and
26.2% of the pro forma market value of Exelon's outstanding common stock
($21 billion)/12/
The table below illustrates that Exelon's exposure to EWG/FUCO investments
will be comparable to the companies who received approval to exceed the safe
harbor investment amount./13/ In several categories, the percentage applicable
to Exelon is well below the highest percentage found reasonable by the
Commission in prior cases./14/
------------------------
/11/This calculation of capitalization includes securitization debt.
/12/The market value of Exelon common stock is calculated using based on
its stock price of $65.60 at March 31, 2001.
/13/Data for other companies taken from public filings except that market
value for National Grid estimated based on $38.125 per share at October 7, 1999
as reported from New York Stock Exchange data.
/14/See The Southern Company ("Southern"), Holding Co. Act Release No.
35-26501 (April 1, 1996); Central and South West Corporation ("CSW"), Holding
Co. Act Release No. 35-26653 (Jan. 24, 1997); GPU, Inc. ("GPU"), Holding Co. Act
Release No. 35-26779 (Nov. 17, 1997); Cinergy, Inc. ("Cinergy"), Holding Co. Act
Release No. 35-26848 (March 23, 1998); American Electric Power Company, Inc.
("AEP"), Holding Co. Act Release No. 35-26864 (April 27, 1998); and New Century
Energies, Inc. ("New Century"), Holding Co. Act Release No. 35-26982 (February
26, 1999); Cinergy Corp., Holding Co. Act Release No. 27190 (June 23, 2000)
(aggregate limit in EWGs and FUCOs of $1.58 billion consisting of its current
investment of $580 million plus $1 billion additional); KeySpan Corporation,
Holding Co. Act Release No. 35-27272 (Nov. 8, 2000).
-8-
Investments in EWGs and FUCOs as a percentage of:
-------------------------------------------------
Company Consolidated Consolidated Net Consolidated Total Market Value of
Capitalization Utility Plant Assets Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Southern 16.3 15.4 11.0 20.4
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CSW 23.0 23.0 14.0 31.0
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GPU 24.9 34.2 19.4 49.8
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Cinergy 16.0 16.0 11.0 19.0
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AEP 16.0 13.8 9.8 18.5
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Entergy Corp. 18.6 17.4 11.7 43.8
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New Century 13.7 11.8 9.1 12.5
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National Grid 46.6 N/A 33.0 7.8
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Cinergy 2000 24.3 24.6 16.5 47.9
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Exelon 2000/15/ 18.9 23.3 11.1 28.2
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KeySpan 16.6 20.9 11.5 29.2
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Average 21.4 20.0 14.4 28.0
------- ---- ---- ---- ----
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Exelon 23.6 42.3 15.9 26.2
Aggregate
Investment ($5.5
billion)
------------------------------------------------------------------------------------------------------------------------------------
Share Price to Earnings Ratio. The financial strength of Exelon is
reflected in the current Price/Earnings ratio which exceeds the industry
average. Exelon's P/E ratio as of March 31, 2001 was 14.4, compared to the
average for utilities in the Standard & Poor's Electric Utility Index of 14.0.
Market to Book Ratio. Exelon's market to book ratio is currently 2.86 based
on a book value of $22.90 per share as of March 31, 2001 and a market price of
$65.60 per share. This ratio is above the industry average, which was 1.79 as of
March 31, 2001 according to Factset Research Systems estimates.
Dividend Payout Ratio. Exelon's payout ratio for 2000 is 48%. Based on the
anticipated dividend and estimates for 2001 earnings Exelon's payout ratio will
be approximately 30% to 40%. This range is well below the industry average of
66.02% reflecting Exelon's response to increasing competition and other
challenges facing the industry./16/ A payout ratio at this level will enable
Exelon to build its equity cushion to support future growth.
4. State Commissions
The Pennsylvania Commission and the Illinois Commission each sent letters
to the Commission indicating that Exelon's proposed aggregate investment of up
to $5.5 billion in
_____________________________
/15/Exelon's approval in the Prior Order based on its pro forma
consolidated figures at June 30, 2000.
/16/Dividend Fundamentals by Sector, Elect. Util (Central), Leonard N.
Stern School of Business, New York University, January 2001, available at
http://www.stern.nyu.edu/~adamodar/New_Home_Page/datafile/divfund.htm.
-9-
EWGs and FUCOs would not adversely affect the respective commission's ability to
continue to assure adequate protection of utility customers and ratepayers.
5. Other Information
Other than the updated financial information presented above, all of the
assertions and commitments made by Exelon in the Original Financing U-1 remain
true and in full force and effect.
E. Refinancing and/or Assumption of Pollution Control Obligations
In the Original Financing U-1 and the Prior Order, Exelon proposed, and the
Commission approved, the assumption by Genco of up to $369 million of pollution
control obligations incurred by PECO in connection with generation facilities
that would be transferred to Genco. The generation assets were transferred to
Genco effective January 1, 2001./17/ Effective January 1, 2001, $195 million of
pollution control bonds were assumed by Genco from PECO. In 2001, Genco expects
to assume an additional $121 million./18/ Exelon now wishes to obtain approval
for Genco to assume all outstanding pollution control obligations of PECO and
ComEd. At December 31, 2000, PECO had a total of $674 million of outstanding
pollution control obligations and ComEd had $438.6 million, for a total of
$1,112,635,000. The outstanding obligations, which were all outstanding prior to
the merger whereby Exelon became subject to the Act, are as follows:
Fixed Rate PECO Energy Company
Bonds ---------------------------------
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Amount First
Outstanding Maturity Call
($millions) Coupon Issuer Date Date
------------------------------------------------------------------------------------------------------------------------------------
39.235 7.375 Delaware Co Industrial Dev Auth 4/1/21 4/1/01
13.150 7.600 Montgomery Co Indust Dev Auth 4/1/21 4/1/01
68.795 6.700 Montgomery Co Indust Dev Auth 12/1/21 12/1/01
29.530 6.625 Montgomery Co Indust Dev Auth 6/1/22 6/1/02
-------
150.710
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-----------------------
/17/As of the date of this filing, the Restructurings, as defined in the
Original Financing U-1, are not complete although the principal component of the
Restructurings -- transfer of generating assets to Genco -- was accomplished
effective January 1, 2001. The Restructurings will not be completed until, among
other things, all of the power marketing contracts of ComEd and PECO are also
transferred to Genco.
/18/Genco has or will "assume" these obligations in various ways. In
certain cases, the terms of outstanding bonds could be amended in connection
with the rate setting and/or tender mechanism to allow Genco to become the
primary or sole obligor. In other cases, Genco will issue new "refunding" bonds
and transfer the proceeds to or for the benefit of PECO to be used to retire the
existing bonds. In some cases, the final maturity of a given series of bonds may
be extended. The interest rates and other provisions applicable to any new bonds
or remarketed may vary based on market conditions at the time of issue.
-10-
Variable and Adjustable Rate Bonds
-------------------------------------------------------------------------------------------------------
Amount
Outstanding Maturity Current
($millions) Coupon Issuer Date Mode
50.000 Variable Delaware Co Industrial Dev Auth 12/1/12 CP
50.000 Variable Delaware Co Industrial Dev Auth 12/1/12 CP
50.000 Variable Delaware Co Industrial Dev Auth 12/1/12 CP
4.200 Variable Salem Co Industrial PC Fin Auth 12/1/12 CP
24.125 Variable Delaware Co Industrial Dev Auth 8/1/16 Daily
18.440 Variable York Co Industrial Dev Auth 8/1/16 Daily
82.560 Variable Montgomery Co Indus Dev Auth 6/1/29 CP
13.340 Variable Montgomery Co Indus Dev Auth 6/1/29 CP
34.000 Variable Montgomery Co Indust Dev Auth 3/1/34 CP
17.240 Variable Indiana Co Indust Dev Auth 6/1/27 Weekly
50.765 5.200 Delaware Co Industrial Dev Auth 4/1/21 NC-5
13.880 5.300 Montgomery Co Indust Dev Auth 10/1/34 NC-5
91.775 5.200 Montgomery Co Indust Dev Auth 10/1/30 NC-5
23.000 5.200 Salem Co Industrial PC Fin Auth 3/1/25 NC-10
-------
523.325
-------------------------------------------------------------------------------------------------------------
Fixed Rate Commonwealth Edison
Bonds
------------------------------------------------------------------------------------------------------------
Amount First
Outstanding Maturity Call
($millions) Coupon Issuer Date Date
100.000 7.2500 Illinois Development Fin Auth 6/1/11 6/1/01
66.000 5.8500 Illinois Development Fin Auth 1/15/14 No Call
91.000 6.7500 Illinois Development Fin Auth 3/1/15 3/1/05
89.400 4.4000 Illinois Development Fin Auth 12/1/06 No Call
-------
346.400
-------------------------------------------------------------------------------------------------------------
Variable Rate Bonds
------------------------------------------------------------------------------------------------------------
Amount
Outstanding Maturity Current
($millions) Coupon Issuer Date Mode
50.000 Variable Illinois Development Fin Auth 3/1/09 Weekly
42.200 Variable Illinois Development Fin Auth 10/15/14 Weekly
-------
92.200
-------------------------------------------------------------------------------------------------------------
Genco currently contemplates that only $346 million of the PECO obligations
and none of the ComEd obligations will be transferred to or assumed by Genco.
To maintain flexibility however, Exelon, PECO, ComEd and Genco seek authority
for Genco to assume any or all of the obligations listed above. In any case
where Genco assumes these obligations PECO or ComEd, as the case may be, will be
released from liability.
-11-
Whether or not the utility is released, any such transfer to or assumption by
Genco will have no impact on Exelon's consolidated capitalization. Any such
assumption and release will, however, have the effect of decreasing the portion
of long-term debt in the capital structure of the transferring utility and will
commensurately improve that utility's common equity ratio.
F. Request to Release Jurisdiction over Short-Term Debt Limit
In the Prior Order, the Commission imposed a requirement that Exelon limit
the amount of short-term indebtedness issued under the authority of the Prior
Order to $3 billion. Exelon recognizes that high levels of short-term debt can
produce risks to the company in the event of a rapid increase in interest rates
or when other conditions make refinancing of such short-term debt at maturity
expensive or otherwise difficult. However, to allow Exelon financial
flexibility to fund its capital needs, including potential acquisitions of major
assets including EWGs or FUCOs, Exelon requests that the short-term limitation
be eliminated. Exelon believes that the most cost effective and efficient
manner to finance a significant investment is through an initial issuance of
short-term indebtedness with a term sufficient to allow for permanent financing
on the most attractive terms. Banks and other lenders are often more willing to
provide favorable terms for such interim financing if it has a final term of
less than one year. Consequently, the most likely means of financing such
significant activity by Exelon would be through an initial short-term borrowing.
Exelon will closely monitor its capital structure and would not undertake short-
term financing of a significant amount unless it was confident that it had a
viable strategy for permanent financing which could, in appropriate cases,
include new equity as well as long-term debt to retire the short-term, interim
acquisition financing.
The Commission has approved general omnibus financing authority, such as
that sought herein, without imposing a sub-limit on short-term debt./19/
G. Genco Short-Term Debt Limitation
ComEd, PECO and Genco have authority under the Prior Order to incur short-
term indebtedness in the aggregate of up to $2.7 billion at any time
outstanding. Because the general financing authority for Genco is also
aggregated with Exelon under its current $4 billion limitation, and Exelon has
the $3 billion limitation on short-term indebtedness referred to in Item 1.G.
above, it is unclear that Genco's short-term borrowings should count against
only the $2.7 billion limitation applicable to ComEd, PECO and Genco and should
not count against the aggregate Exelon limitation ($4 billion currently and $8
billion total as requested hereby). Exelon believes this was the intent of the
Original Financing U-1 and the Prior Order. However, Exelon requests that the
Commission clarify that any short-term borrowing by Genco shall only count
against the aggregate ComEd/PECO/Genco limitation of $2.7 billion.
H. Clarification Regarding Refinancing
In the Prior Order, the Commission approved the outstanding securities of
Exelon and subsidiaries. Exelon intended that the authority for new financing
in the Prior Order would
-------------------------
/19/See, e.g., KeySpan Corp., Holding Co. Act Release No. 35-27272 (Nov. 8,
2000); Scottish Power plc, Holding Co. Act Release No. 35-27290 (Dec. 6. 2000).
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extend to financings that resulted in an increase in the capitalization of
Exelon, ComEd, PECO or Genco, as the case may be. Thus, refinancings (including
the refinancings involving the transfer to or assumption by Genco of pollution
control obligations of PECO or ComEd described in Paragraph E above) that merely
replace securities existing on the date Exelon became subject to the Act, or
replace securities issued under the authority sought herein, in order to achieve
lower interest rates, differing terms and conditions, extension of the maturity
or other proper business purposes or to replace debt with equity or vice versa),
do not reduce the amount available for "new" financing (except to the extent
such refinancing offering exceeds the principal amount of the security refunded
or replaced). Exelon requests that the Commission clarify this understanding.
Considering financing limitations to apply only to "new" issuances and not
refinancing is consistent with Commission precedent./20/
I. Exemption from Section 13(b)
In the November 2 Order, the Commission approved the existing
securitization transactions of PECO and any refinancing of those securities to
refinance and extend the maturity of the obligations to lower interest costs.
As part of the existing securitization transactions described in the Original
Financing U-1, PECO has entered into a servicing agreement with PETT. To help
ensure the necessary legal separation for purposes of isolating PETT from PECO
for bankruptcy purposes, the rating agencies desire any servicing arrangement to
be at a market price so that a successor entity could assume the duties in the
event of the bankruptcy of PECO without interruption or an increase in fees.
Accordingly, the servicing agreement has provided for such pricing and will
continue to do so. To the extent not already approved in the November 2 Order,
Exelon seek approval under Section 13 of the Act and Rules 87, 90 and 91 as are
necessary from the Commission to continue this practice. The Commission has
approved substantially identical arrangements in other matters./21/
J. Money Pool
Exelon requests that it be authorized to lend into the Non-Utility Money
Pool with the participation of the following additional non-utility
subsidiaries:
Exelon Enterprises Company, LLC; Exelon Infrastructure Services, Inc.;
Energy Trading Company; Unicom Healthcare Management, Inc.; Exelon Thermal
Technologies, Inc.; Exelon Communications Company, LLC; Exelon Ventures
Corporation; Exelon Services, Inc.; Exelon Capital Partners, Inc.; Exelon Energy
Inc.; Exelon Energy Ohio, Inc.; Adwin Equipment Company; Unicom Power Holdings,
Inc. and Unicom Power Marketing, Inc.
In addition, because in most cases all non-utility subsidiaries may borrow
from Exelon, and Exelon may purchase the securities of non-utility subsidiaries
without Commission approval under Rules 52(b) and (d), Exelon requests
confirmation that any other non-utility subsidiary may participate in the Non-
Utility Money Pool without further Commission authorization.
__________________________
/20/ See, e.g., Scottish Power plc, Holding Co. Act Release No. 35-27290
(Dec.6, 2000); Cinergy Corp., Holding Co. Act Release No. 35-27190
(June 23, 2000);Central & South West Corp., Holding Co. Act Release
No. 35-26811 (Dec. 30, 1997)
/21/ West Penn Power Co., Holding Co. Act Release No. 27091 (Oct. 19,1999).
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Exelon indicated that the interest rate for borrowings under the Money
Pools from "internal funds" would be tied to the market rate for high grade 30
day commercial paper. Exelon requests that the rate instead be the greater of
the rate for such high grade 30 day commercial paper or the rate then available
to the lending company from an eligible investment in readily marketable money
market funds. The purpose of this change is to ensure that the lending company
does not forego any investment return which it could have obtained by investing
in such money market funds instead of the Money Pool.
K. Minor Clarifications
In Amendment No. 2 to the Original Financing U-1, Exelon indicated that a
$128 million obligation of PECO in favor of the holders of preferred securities
issued by PECO Energy Capital LP would "count against" the limitations on
additional guarantees included in the Prior Order. This guarantee obligation of
PECO relates to a financing subsidiary transaction and to include this guarantee
under the limitations would be a "double count" which is inconsistent with how
similar transactions will be treated under the Prior Order. Further, PECO had a
guaranty of $100 million in favor of AmerGen LLC, which is an EWG which guaranty
is now given by Genco as a result of the Restructurings which resulted in
AmerGen being a subsidiary of Genco rather than PECO. This guaranty is also
listed as "counting against" the new guaranty limits.
Except for the two instances noted in the prior paragraph, all other
guaranties existing at the time of the Merger were allowed under the Prior Order
to remain in place without counting against the new guaranty limits.
Accordingly, Exelon and PECO request confirmation that the $128 million guaranty
by PECO of PECO Energy Capital LP and the $100 million guaranty by Genco of
AmerGen will not count against the guaranty limits.
L. Exhibit
Amended Exhibit K-1 is filed on paper under Form SE.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicants have duly caused this amendment to Application/Declaration
to be signed on their behalf by the undersigned thereunto duly authorized.
Date: August 15, 2001
Exelon Corporation Exelon Business Services Company
Exelon Ventures Company
By /s/ Ruth M. Gillis Exelon Enterprises Company, LLC
------------------ Exelon Generation Company, LLC
Senior Vice President and Exelon Energy Delivery Company
Chief Financial Officer
By Exelon Corporation
By /s/ Ruth M. Gillis
------------------
Senior Vice President and
Chief Financial Officer
Commonwealth Edison Company Peco Energy Company
By /s/ Robert E. Berdelle By /s/ Thomas P. Hill
---------------------- ------------------
Vice President and Vice President and
Chief Financial Officer Chief Financial Officer
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