Exelon 2014 Annual Report Download - page 48

Merger and Acquisition Costs
As discussed above, Exelon has incurred and will continue to incur costs associated with the Integrys and PHI acquisitions including
employee-related expenses (e.g. severance, retirement, relocation and retention bonuses), financing costs, integration initiatives,
and certain pre-acquisition contingencies.
For the year ended December 31, 2014, expense has been recognized for costs incurred to achieve the Constellation merger,
CENG integration, Integrys acquisition and proposed PHI acquisition as follows:
Pre-tax Expense
Twelve Months Ended December 31, 2014
Merger Integration and Acquisition Costs: Generation ComEd PECO BGE Exelon
Financing (a) ............................................................. $— $— $— $— $131
Regulatory Commitments (b) ................................................ 44 — — — 44
Transaction (c) ........................................................... — — — — 26
Employee-Related (d) ...................................................... 5 — — — 5
Other (e) ................................................................. 56 4 2 2 65
Total ................................................................... $105 $ 4 $ 2 $ 2 $271
Pre-tax Expense
Twelve Months Ended December 31, 2013
Merger Integration Costs: Generation ComEd PECO BGE Exelon
Employee-Related (d) ...................................................... $ 48 $ 4 $ 3 $ 1 $ 58
Other (e) ................................................................. 58 12 6 5 84
Total ................................................................... $106 $ 16 $ 9 $ 6 $142
(a) Reflects costs incurred at Exelon related to the financing of the PHI merger, including upfront credit facility fees.
(b) Reflects costs incurred at Generation for a Constellation merger commitment.
(c) External, third party costs paid to advisors, consultants, lawyers and other experts to assist in the due diligence and regulatory approval processes and in the closing
of transactions.
(d) Costs primarily for employee severance, pension and OPEB expense and retention bonuses. ComEd established regulatory assets of $2 million for the year ended
December 31, 2013. The majority of these costs are expected to be recovered over a five-year period. These costs are not included in the table above.
(e) Costs to integrate CENG and Constellation processes and systems into Exelon and to terminate certain Constellation debt agreements. For the year ended
December 31, 2014, also includes professional fees primarily related to integration for the proposed PHI acquisition. ComEd and BGE established regulatory assets
of $9 million and $12 million, respectively, for the year ended December 31, 2013, for certain other merger and integration costs, which are not included in the table
above.
As of December 31, 2014, Exelon projects incurring total additional PHI acquisition and integration related expenses of $650 million,
of which approximately $100 million is expected to be capitalized to property, plant and equipment excluding the direct investment
Exelon and PHI have proposed to the PHI utilities respective customers.
Pursuant to the conditions set forth by the MDPSC in its approval of the merger transaction, Exelon committed to provide a package
of benefits to BGE customers, and make certain investments in the City of Baltimore and the State of Maryland, resulting in an
estimated direct investment in the State of Maryland of approximately $1 billion. The direct investment estimate includes $95 million
to $120 million for the requirement to cause construction of a headquarters building in Baltimore for Generation’s competitive energy
businesses. On March 20, 2013, Generation signed a twenty-year lease agreement that was contingent upon the developer
obtaining all required approvals, permits and financing for the construction of a building in Baltimore, Maryland. The operating lease
became effective during the second quarter of 2014 when these outstanding contingencies were met by the developer. The building
is expected to be ready for occupancy in approximately 2 years. See Note 22—Commitments and Contingencies of the Combined
Notes to Consolidated Financial Statements for further information related to the lease commitments.
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