ComEd 2015 Annual Report Download - page 93

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subject to court approval. Final court approval of the proposed settlement is not anticipated until approximately 90 days after merger close. Exelon
does not believe these suits will impact the completion of the transaction, and they are not expected to have a material impact on Exelon’s results
of operations.
Including 2014 and through December 31, 2015, Exelon has incurred approximately $259 million of expense associated with the proposed
merger. Of the total costs incurred, $121 million is primarily related to acquisition and integration costs and $138 million are for costs incurred to
finance the transaction. The financing costs include $22 million of costs associated with the private exchange offer and redemption of certain
Senior Unsecured Notes (see Note 14—Debt and Credit Agreements of the Combined Notes to the Consolidated Financial Statements for further
information on the exchange), as well as, a net loss of $64 million related to the settlement of forward-starting interest-rate swaps. These swaps
were terminated in connection with the $4.2 billion issuance of debt; refer to Note 13—Derivative Financial Instruments of the Combined Notes to
the Consolidated Financial Statements for more information. The financing costs exclude costs to issue equity and the initial debt offering which
we recorded to Exelon’s Consolidated Balance Sheets.
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 of the Combined Notes to the Consolidated Financial Statements for further information on the debt and equity issuances.
Exelon has listed various potential risks relating to the pending merger with PHI (see ITEM 1A. RISK FACTORS), including difficulties that
may be encountered in satisfying the conditions to completion of the merger and the potential for developments that might have an adverse effect
on Exelon and the ability to realize the expected benefits of the merger. Exelon is taking steps to manage these risks and expects that the merger
can be completed on a basis favorable to the company’s shareholders and customers. Refer to Note 4—Mergers, Acquisitions, and Dispositions of
the Combined Notes to Consolidated Financial Statements for additional information on the merger transaction.
Implications of Potential Early Plant Retirements
Exelon and Generation continue to evaluate the current and expected economic value of each of Generation’s nuclear plants. Factors that
will continue to affect the economic value of Generation’s nuclear plants include, but are not limited to: market power prices, results of capacity
auctions, potential legislative solutions in New York and Illinois such as the proposed Low Carbon Portfolio Standard (LCPS) legislation, the impact
of final rules from the EPA requiring reduction of carbon and other emissions and the efforts of the states to implement those final rules, and the
outcome of the Ginna RSSA hearing and settlement procedures and the resulting contractual terms and conditions.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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