Exelon 2001 Annual Report Download - page 66

64
During 2001, Exelon finalized its plans for consolidation of functions, including negotiation of an agreement with the union
regarding severance benefits to union employees and recorded adjustments to the purchase price allocation as follows:
Original 2001 Adjusted
Estimate Adjustments Liabilities
Employee severance payments $ 128 $ 33 $ 161(a)
Actuarially determined pension and postretirement costs 158 (11) 147(b)
Relocation and other severance 21 9 30(a)
Total Unicom-Employee Cost $ 307 $ 31 $ 338
(a) The increase is a result of the identification in 2001 of additional positions to be eliminated.
(b) The reduction results from lower estimated pension and post retirement welfare benefits reflecting revised actuarial estimates.
Additional employee severance costs of $48 million primarily related to PECO employees were charged to expense in 2001.
Exelon anticipates that a total of $289 million of employee costs will be funded from pension and postretirement benefit
plans and $191 million of Unicom employee severance costs will be funded from general corporate funds.
The following table provides a reconciliation of the reserve for employee severance and relocation costs associated
with the merger:
Employee severance and relocation reserve as of October 20, 2000 $ 149
Additional reserve 42
Adjusted employee severance and relocation reserve 191
Payments to employees (October 2000-December 2001) (77)
Employee severance and relocation reserve as of December 31, 2001 $ 114
Approximately 3,400 Unicom and PECO positions have been identified to be eliminated as a result of the merger. Exelon has
terminated 1,461 employees as of December 31,2001.The remaining positions are expected to be eliminated by the end of 2002.
(03) Acquisitions
Sithe Energies, Inc. Acquisition
Generation owns 49.9% of the outstanding common stock of Sithe and has an option, beginning on December 18, 2002, to
purchase the remaining common stock outstanding (Remaining Interest) in Sithe. The purchase option expires on
December 18, 2005. In addition, the Sithe stockholders who own in the aggregate the Remaining Interest have the right to
require Generation to purchase the Remaining Interest (Put Rights) during the same period in which Generation can
exercise its purchase option. At the end of this exercise period, if Generation has not exercised its purchase option and the
other Sithe stockholders have not exercised their Put Rights, Generation will have an additional one-time option to
purchase shares from the other stockholders in Sithe to bring Generation’s ownership in Sithe from the current 49.9% to
50.1% of Sithe’s total outstanding common stock.
If Generation exercises its option to acquire the Remaining Interest, or if all the other Sithe stockholders exercise their
Put Rights, the purchase price for 70% of the Remaining Interest will be set at fair market value subject to a floor of $430
million and a ceiling of $650 million. The balance of the Remaining Interest will be valued at fair market value without
being subject to floor or ceiling prices. In either instance, interest shall accrue from the beginning of the exercise period.
If Generation increases its ownership in Sithe to 50.1% or more, Sithe will become a consolidated subsidiary and Exelon’s
financial results will include Sithe’s financial results from the date of purchase. At December 31, 2001, Sithe had total assets
of $4.2 billion and long-term debt of $2.3 billion, including $2.1 billion of non-recourse project debt, and excluding any non-
recourse project debt associated with Sithe’s equity investments. For the year ended December 31, 2001 Sithe had revenues
of $1 billion. As of December 31, 2001 Exelon had a $725 million equity investment in Sithe.