ComEd 2015 Annual Report Download - page 294

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
(a) The costs incurred are classified primarily within Operating and maintenance expense in the Registrants’ respective Consolidated Statement of Operations and Comprehensive
Income, with the exception of the financing costs, which are included within Interest expense.
Under certain circumstances, if the Merger Agreement is terminated, PHI may be required to pay Exelon a termination fee ranging from $259
million to $293 million plus certain expenses. If the Merger Agreement is terminated due to a failure to obtain a required regulatory approval,
Exelon may be required to pay PHI a termination fee equal to $180 million through the redemption by PHI of the outstanding nonvoting preferred
securities described above for no consideration other than the nominal par value of the stock, plus reimbursement of PHI’s documented out-of-
pocket expenses up to a maximum of $40 million.
Merger Financing
Exelon has raised cash to fund the all-cash purchase price, acquisition and integration related costs, and merger commitments, through the
issuance of $4.2 billion of debt (of which $3.3 billion remains after execution of the exchange offer, see Note 14—Debt and Credit Agreements for
further information on the exchange), $1.15 billion of junior subordinated notes in the form of 23 million equity units, the issuance of $1.9 billion of
common stock, cash proceeds of $1.8 billion from asset sales primarily at Generation (after-tax proceeds of approximately $1.4 billion) and the
remaining balance from cash on hand and/or short-term borrowings available to Exelon. Exelon will have sufficient cash to fund the all-cash
purchase price, acquisition and integration related costs, and merger commitments. See Note 14—Debt and Credit Agreements and Note 19—
Shareholder’s Equity for further information on the debt and equity issuances.
Acquisitions (Exelon and Generation)
Acquisition of Integrys Energy Services, Inc. (Exelon and Generation)
On November 1, 2014, Generation acquired the competitive retail electric and natural gas business activities of Integrys Energy Group, Inc.
through the purchase of all of the stock of its wholly owned subsidiary, Integrys Energy Services, Inc. (IES) for a purchase price of $332 million,
including net working capital. Generation has elected to account for the transaction as an asset acquisition for federal income tax purposes. The
generation and solar asset businesses of Integrys are excluded from the transaction. The Purchase Agreement also includes various
representations, warranties, covenants, indemnification and other provisions customary for a transaction of this nature.
Consistent with the applicable accounting guidance, the fair value of the assets acquired and liabilities assumed was determined as of the
acquisition date through the use of significant estimates and assumptions that are judgmental in nature. Some of the more significant estimates
and assumptions used include: projected future cash flows (including the amount and timing); discount rates reflecting the risk inherent in the
future cash flows; and future power and fuel market prices.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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