The sale is expected to close by the end of June 2010. It does not include Conectiv Energy’s load service supply contracts, energy hedging portfolio, certain tolling agreements and several other non-core assets.
Pepco expects to liquidate the remaining contracts and assets within the next 12 months. The proceeds from the liquidation, combined with the return of collateral posted under the contracts, will further enhance the value of the transaction to Pepco.
The estimated proceeds associated with the sale to Calpine and the liquidation of the remaining contracts and assets, combined with the return of collateral posted under the contracts, is expected to result in funds to Pepco of approximately $2.05bn, or approximately $1.75bn net of $300m of estimated taxes on the sale and liquidation of the assets.
Pepco expects to use the $1.75bn of net funds primarily for its debt reduction. The company currently estimates that the sale of the Conectiv Energy generation assets and the liquidation of the remaining contracts and assets will result in a loss for financial reporting purposes through the next twelve months in the range of $60m to $90m, after tax.
The transaction will require the approval of the Federal Energy Regulatory Commission and satisfaction of the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
