Exelon 2015 Annual Report Download - page 293

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
the Merger Agreement before March 4, 2016, except under limited circumstances. If the DCPSC does not approve the Settlement Agreement by
March 4, 2016, either Exelon or PHI may terminate the Settlement Agreement.
The settlements reached and commission orders received to date in Delaware, Maryland and New Jersey include a “most favored nation”
provision which, generally speaking, requires allocation of merger benefits proportionately across all the jurisdictions. When applying the most
favored nation provision to the settlement terms and other conditions established in the merger approvals received to date, and as proposed in the
Settlement Agreement filed with the DCPSC, Exelon and PHI currently estimate direct benefits of $430 million or more on a net present value
basis (excluding charitable contributions and renewable generation commitments) will be provided, including rate credits, funding for energy
efficiency programs and other required commitments. Exelon and PHI anticipate substantially all of such amounts will be charged to earnings at
the time of merger close and will be paid by the end of 2017. An additional $53 million will be charged to earnings at the time of the merger close
for charitable contributions, which are then required to be paid over a period of 10 years. Commitments to develop renewable generation, which are
expected to be primarily capital in nature, will be recognized as incurred. Upon completion of the merger, the actual nature, amount, timing and
financial reporting treatment for these commitments may be materially different from the current projection.
Exelon has been named in suits filed in the Delaware Chancery Court alleging that individual directors of PHI breached their fiduciary duties
by entering into the proposed merger transaction and Exelon aided and abetted the individual directors’ breaches. The suits seek to enjoin PHI
from completing the merger or seek rescission of the merger if completed. In addition, they also seek unspecified damages and costs. Exelon was
also named in a federal court suit making similar claims. In September 2014, the parties reached a proposed settlement that would resolve all
claims, which is 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 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 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.
For the year ended,
Acquisition, Integration and Financing Costs 2015 2014
Exelon $ 80 $ 179
Generation 25 11
ComEd 10 4
PECO 5 2
BGE 5 2
286
(a)
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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