Filed by Exelon Corporation
(Commission File No. 1-16169)
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934
Subject Company: Constellation Energy Group, Inc.
(Commission File No. 1-12869)
On June 1, 2011, Exelon began to use the following slides concerning the proposed merger and other information in a series of meetings with investors:
Exelon and
Constellation Energy Merger Investor Meetings
June 2011 |
Cautionary
Statements Regarding Forward-Looking Information
24
Except for the historical information contained herein, certain of the matters discussed in
this communication constitute forward- looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, both as amended by
the Private Securities Litigation Reform Act of 1995. Words such as may,
will, anticipate, estimate, expect, project,
intend, plan, believe, target,
forecast, and words and terms of similar substance used in connection with any discussion of
future plans, actions, or events identify forward-looking statements. These
forward-looking statements include, but are not limited to, statements regarding
benefits of the proposed merger, integration plans and expected synergies, the expected timing of
completion of the transaction, anticipated future financial and operating performance and
results, including estimates for growth. These statements are based on the current
expectations of management of Exelon Corporation (Exelon) and Constellation Energy
Group, Inc. (Constellation), as applicable. There are a number of risks and uncertainties that
could cause actual results to differ materially from the forward-looking statements
included in this communication. For example, (1) the companies may be unable to obtain
shareholder approvals required for the merger; (2) the companies may be unable to obtain regulatory approvals required for
the merger, or required regulatory approvals may delay the merger or result in the imposition
of conditions that could have a material adverse effect on the combined company or
cause the companies to abandon the merger; (3) conditions to the closing of the merger
may not be satisfied; (4) an unsolicited offer of another company to acquire assets or capital stock of Exelon or
Constellation could interfere with the merger; (5) problems may arise in successfully
integrating the businesses of the companies, which may result in the combined company
not operating as effectively and efficiently as expected; (6) the combined company may
be unable to achieve cost-cutting synergies or it may take longer than expected to achieve
those synergies; (7) the merger may involve unexpected costs, unexpected liabilities or
unexpected delays, or the effects of purchase accounting may be different from the
companies expectations; (8) the credit ratings of the combined company or its subsidiaries may be different from what the
companies expect; (9) the businesses of the companies may suffer as a result of uncertainty
surrounding the merger; |
Cautionary
Statements Regarding Forward-Looking Information
25
(10) the companies may not realize the values expected to be obtained for properties expected
or required to be divested; (11) the industry may be subject to future regulatory or
legislative actions that could adversely affect the companies; and (12) the companies
may be adversely affected by other economic, business, and/or competitive factors. Other
unknown or unpredictable factors could also have material adverse effects on future
results, performance or achievements of the combined company. Discussions of some of
these other important factors and assumptions are contained in Exelons and Constellations respective filings with the Securities
and Exchange Commission (SEC), and available at the SECs website at www.sec.gov,
including: (1) Exelons 2010 Annual Report on Form 10-K in (a) ITEM 1A. Risk
Factors, (b) ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 18; (2)
Exelons Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2011 in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part I, Financial Information,
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note
12; (3) Constellations 2010 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations and
(c) ITEM 8. Financial Statements and Supplementary Data: Note 12; and (4)
Constellations Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2011 in (a) Part II, Other Information, ITEM 5.Other Information, (b) Part I, Financial
Information, ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements:
Notes to Consolidated Financial Statements, Commitments and Contingencies. These risks,
as well as other risks associated with the proposed merger, will be more fully
discussed in the joint proxy statement/prospectus that will be included in the Registration
Statement on Form S-4 that Exelon will file with the SEC in connection with the proposed
merger. In light of these risks, uncertainties, assumptions and factors, the
forward-looking events discussed in this communication may not occur. Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date of this communication. Neither Exelon nor Constellation undertake
any obligation to publicly release any revision to its forward-looking statements to
reflect events or circumstances after the date of this communication.
(Continued) |
Additional
Information and Where to Find It 26
This communication does not constitute an offer to sell or the solicitation of an offer to buy any
securities, or a solicitation of any vote or approval, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such jurisdiction. Exelon
intends to file with the SEC a registration statement on Form S-4 that will include a joint proxy
statement/prospectus and other relevant documents to be mailed by Exelon and Constellation to their
respective security holders in connection with the proposed merger of Exelon and Constellation.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION about Exelon, Constellation and the proposed merger. Investors and security
holders will be able to obtain these materials (when they are available) and other documents
filed with the SEC free of charge at the SEC's website, www.sec.gov. In addition, a copy
of the joint proxy statement/prospectus (when it becomes available) may be obtained free of
charge from Exelon Corporation, Investor Relations, 10 South Dearborn Street, P.O. Box 805398, Chicago,
Illinois 60680-5398, or from Constellation Energy Group, Inc., Investor Relations, 100
Constellation Way, Suite 600C, Baltimore, MD 21202. Investors and security holders may also
read and copy any reports, statements and other information filed by Exelon, or Constellation,
with the SEC, at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 or visit the SECs website for further information on
its public reference room.
Participants in the Merger Solicitation
Exelon, Constellation, and their respective directors, executive officers and certain other members of
management and employees may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Exelons directors and
executive officers is available in its proxy statement filed with the SEC by Exelon on March
24, 2011 in connection with its 2011 annual meeting of shareholders, and information regarding
Constellations directors and executive officers is available in its proxy statement filed with
the SEC by Constellation on April 15, 2011 in connection with its 2011 annual meeting of
shareholders. Other information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other relevant materials to be filed with the
SEC when they become available. |
Creating Value
Through a Strategic Merger
Delivers financial benefits to both sets of shareholders
Increases scale and scope of the business across the value chain
Matches the industrys premier clean merchant generating fleet with the
leading retail and wholesale customer platform
Diversifies the generation portfolio
Continued upside to power market recovery
Maintains a strong regulated earnings profile with large urban utilities
Combining Exelons generation fleet and Constellations
customer-facing businesses creates a strong platform for growth and
delivers benefits to investors and customers
27 |
$7 billion
$11 billion
11,430 (Total)
1,921 (Nuclear)
1.2 mil. (MD)
0.7 mil. (MD)
44 states & D.C.
(5)
~106 TWh/yr
15% Generation
50% Utility
35% NewEnergy
Combination Will Result in Enhanced Scale,
Scope, Flexibility and Financial Strength
(1) Market Value as of 4/27/11. Enterprise Value represents Market Value plus
Net Debt as of 3/31/11 for Exelon and 12/31/10 for Constellation (2)
Data as
of
12/31/10.
Exelon
data
includes
720
MW
for
Wolf
Hollow
assets.
Constellation
data
includes
2,950
MW
for
Boston
Generation
assets
and
excludes
550
MW
for
Quail
Run.
(3) Net of physical market mitigation assumed to be 2,648 MW.
(4) TWh/yr
represents
2011
booked
electric
sales.
Exelon
load
includes
ComEd
swap.
(5) Competitive
and
wholesale
business
also
active
in
Alberta,
British
Columbia
and
Ontario,
Canada.
(6) Exelon
EBITDA
estimates
per
equity
research.
Constellation
EBITDA
estimates
per
company
guidance.
Market Value and
Enterprise
Value
(1)
Pro forma
Standalone
Owned
Generation
(in MW)
(2)
Regulated
Utilities
Competitive
Retail &
Wholesale
(4)
Business Mix
(6)
$27 billion
$41 billion
26,339 (Total)
17,047 (Nuclear)
Electric customers
5.4 mil. (IL, PA)
Gas customers
0.5 mil. (PA)
4 states
~59
TWh/yr
2012E EBITDA
51% Generation
49% Utilities
$34 billion
$52 billion
44 states & D.C.
(5)
~165
TWh energy sales
Expect >50% pro forma EBITDA
from competitive business
35,121 (Total)
(3)
18,968 (Nuclear)
6.6 million electric & gas customers
in IL, PA and MD
28 |
Transaction
Overview
100%
stock
0.930
shares
of
EXC
for
each
share
of
CEG
Upfront
transaction
premium
of
18.1%
(1)
$2.10 per share Exelon dividend maintained
Expect to close in early 1Q 2012
Exelon and Constellation shareholder approvals in 3Q 2011
Regulatory approvals including FERC, DOJ, MD, NY, TX
Executive Chairman: Mayo Shattuck
President and CEO: Chris Crane
Board of Directors: 16 total (12 from Exelon, 4 from Constellation)
Exelon Corporation
78% Exelon shareholders
22% Constellation shareholders
Corporate headquarters: Chicago, IL
Constellation headquarters: Baltimore, MD
No change to utilities
headquarters
Significant employee presence maintained in IL, PA and MD
Company Name
Consideration
Pro Forma
Ownership
Headquarters
Governance
Approvals &
Timing
(1) Based on the 30-day average Exelon and Constellation closing stock
prices as of April 27, 2011. 29 |
Exelon
Transaction Rationale
Increases
geographic
diversity
of
generation,
load
and
customers
in
competitive
markets
This transaction meets all of our M&A criteria and can be executed
Shared
Commitment to
Competitive
Markets
Enhances
Scalable Growth
Platform
Creates
Shareholder
Value
Expands a valuable channel to market our generation
Enhances margins in the competitive portfolio
Diversifies portfolio across the value chain
EPS break-even in 2012 and accretive by +5% in 2013
Maintains strong credit profile and financial discipline
Maintains earnings upside to future environmental regulations and power market
recovery
Adds stability to earnings and cash flow
30
Adds mix of clean generation to the portfolio
Clean
Generation Fleet |
Constellation
Transaction Rationale
Upfront
premium
of
18.1%
(1)
Dividend accretion of 103% post-closing
Enhances upside to power market recovery and synergies
The transaction creates financial and strategic value that is consistent with
Constellations existing strategy
Creates
Shareholder
Value
Creates balance sheet capacity to pursue growth opportunities
throughout the competitive portfolio
Reduces cost of capital
Balance Sheet
Strength
Complementary
Portfolios
Advances
strategy of matching load with physical generation in key
competitive markets
Lowers collateral costs of competitive businesses
31
(1) Based on the 30-day average Exelon and Constellation closing stock
prices as of April 27, 2011. |
This Combination
Is Good for Maryland
Maintains employee presence and platform for growth in Maryland
Exelons Power Team will be combined with Constellations wholesale and
retail business
under
the
Constellation
brand
and
will
be
headquartered
in
Baltimore
Constellation
and
Exelons
renewable
energy
business
headquartered
in
Baltimore
BGE maintains independent operations headquartered in Baltimore
No involuntary merger-related job reductions at BGE for two years after
close
Supports Marylands economic development and clean energy infrastructure
$10 million to spur development of electric vehicle infrastructure
$4 million to support EmPower Maryland Energy Efficiency Act
25 MWs of renewable energy development in Maryland
Charitable contributions maintained for at least 10 years
Provides direct benefits to BGE customers
$5
million
provided
for
Marylands
Electric
Universal
Service
Program
(EUSP)
Over $110 million to BGE residential customers from $100 one-time rate
credit We
will
bring
direct
benefits
to
the
State
of
Maryland,
the
City
of
Baltimore
and
BGE customers. Total investment in excess of $250 million.
32 |
2Q
2011 3Q 2011
4Q 2011
1Q 2012
Merger
Announcement
Make Regulatory
Filings
Mail Proxy
Materials
Exelon and
Constellation
Shareholder
Meetings
Transaction Close
Divestiture
Process
Transaction Timetable
33
Secure Regulatory Approvals (including FERC, DOJ, Maryland, NRC,
New York and Texas) |
Status of Merger
Approvals (as of 5/31/11) 34 |
Transaction
Economics Are Attractive for Both Companies
Refined synergy run-rate and costs to achieve
estimates due to greater accessibility and availability of
data post-merger announcement
Higher net O&M savings over 5 years of ~$50
million
Updated synergy run-rate of ~$310 million/year
Additional synergies primarily from corporate and
commercial consolidation
Total costs to achieve of ~$650 million
Incremental costs to achieve attributable to
employee related costs and transaction costs
35
Financial Metrics
EPS break-even in 2012 and accretive by +5% in 2013
Free cash flow accretive beginning in 2012
Lower consolidated liquidity requirements, resulting in cost savings
Investment-grade ratings and credit metrics
Synergies
Other
~ 20%
Corporate &
Commercial
Consolidation
~ 80% |
A Clean
Generation Profile Creates Long-Term Value in Competitive Markets
(1) Net of physical market mitigation assumed to be 2,648 MW.
(2)
Exelon generation includes Wolf Hollow acquisition (720 MW of natural gas). Constellation generation
includes Boston Generation acquisition (2,950 MW of
natural
gas)
and
excludes
Quail
Run
(~550
MW
of
natural
gas).
Constellation
nuclear
reflects
50.01%
interest
in
Constellation
Energy
Nuclear
Group
LLC.
36
Exelon Standalone
Total Generation: 26,339 MW
Constellation Standalone
(2)
Total Generation: 11,430 MW
Pro forma Company (Net of Mitigation)
(1)
Total Generation: 35,121 MW
Combined company remains the premier low-cost generator
Coal
5%
Oil
7%
Gas
13%
Hydro
7%
Wind/Solar/Other
3%
Nuclear
65%
Coal
24%
Nuclear
17%
Oil
3%
Gas
52%
3%
Wind/Solar/Other
2%
Hydro
Nuclear
54%
Coal
6%
Oil
6%
Gas
25%
Hydro
6%
Wind/Solar/
Other
3% |
Increased
Regional Diversity in PJM: Capacity
Eligible
for
2014/15
RPM
Auction
(1)
2014/15 RPM
auction
results
were
announced
on
May
13
th
,
2011
(1)
All generation values are approximate and not inclusive of wholesale transactions;
all capacity values are in installed capacity terms (summer ratings) located
in the areas and adjusted for mid-year PPA roll-offs. 4,390 MW
37
Pro forma Company
4,390 MW
2,535 MW
9,230 MW
11,345 MW
Exelon Standalone
Constellation Standalone
8,700 MW
10,300 MW
1,500 MW
1,035 MW
1,045 MW
530 MW
42%
7%
51%
8%
15%
15%
63%
16%
34%
41%
9%
RTO
MAAC
EMAAC
EMAAC
MAAC
RTO
SWMAAC
RTO
EMAAC
MAAC
SWMAAC |
225
400
520
119
20
20
550
550
867
825
552
260
415
516
1,340
550
500
800
702
600
550
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2012
2013
2014
2015
2016
2017
2018
2019
2020
(in $M)
Constellation Regulated
Constellation Unregulated
Exelon Regulated
Exelon Unregulated
Ample Liquidity and Manageable
Debt Maturities
Sources of Liquidity
Debt
Maturity
Profile
(2012-2020)
(2)
Exelon & Constellation (excluding utilities)
currently have $10.3 billion of liquidity
Additional $2.2 billion of utility liquidity
Matching retail load and generation
reduces liquidity requirements for
combined company
$6.3B -
$7.3 billion
(1)
of liquidity provides
ample cushion
38
(1)
Based on preliminary analysis.
(2)
Debt
maturity
schedule
as
of
12/31/10,
except
for
make
whole
of
Constellation
Energy
2012
notes
in
January,
2011.
~75% of 2012
2016 debt
maturities consist of
regulated utility debt
(in $B)
(1)
Constellation
$4.2
Exelon
$6.1
$3
-
$4
Pro forma
$6.3
-
$7.3
Existing liquidity
(ex-utilities)
Reduction in
existing liquidity
Pro forma liquidity |