PECO Energy to Purchase Sithe North America

PHILADELPHIAà‚–PECO Energy Co. has signed a definitive agreement to purchase 49.9 percent of Sithe Energies’ North American businesses for $682 million, with an option to purchase 100 percent of the company within two to five years, at a price based on prevailing market conditions.

The deal is anticipated to close in the fourth quarter of 2000, by which time PECO Energy’s pending merger with Unicom Corp., to form Exelon Corp., is expected to be completed.

The Sithe purchase involves 3,800 MW of existing merchant generation, 2,500 MW under construction, and another 3,700 MW of generation in various stages of advanced development, as well as Sithe’s domestic marketing and development businesses. The generation assets are primarily in Massachusetts and New York, but also include plants in Pennsylvania, California, Colorado and Idaho, as well as Canada and Mexico.

The full purchase will increase Exelon’s national generation footprint 46,000 MW, making Exelon one of the top generation companies in the nation.

Corbin McNeill, Jr., chairman, president and CEO of PECO Energy, and John Rowe, chairman, president and CEO of Unicom, who will become co-CEOs of Exelon, said in a joint statement:

“This purchase represents a significant step forward for Exelon’s generation strategy and our objective of becoming the nation’s premier power generator and marketer. The transaction expands our core competencies in natural gas fired generation, greenfield development and trading and marketing. It also reflects Exelon’s strategy to optimize its portfolio through a balanced generation mix and geographic presence.

“This transaction gives us the opportunity to join with one of the country’s leading merchant power developers operating a quality fleet of assets in robust, unregulated power markets. Combined with Exelon’s existing generation assets, this gives us a much broader and more diverse market presence in the US, creating excellent value for our shareholders.

“This purchase will create a whole new dimension to Exelon’s business and competitive profile. Our generating focus is now broader, moving well beyond our core nuclear generating competency. Also, acquisition of a large fleet of assets on a negotiated basis creates more value for our shareholders than highly competitive single plant auctions.

“Additionally, we will be acquiring an extensive electric and natural gas trading presence in the New England and New York power pools, complementing our already strong midwest and mid-Atlantic positions, and the transaction will give us one of the strongest generation development capabilities in the world.”

William Kriegel, chairman and CEO of Sithe, said, “Sithe has assembled one of the largest portfolios of environmentally-friendly, non-nuclear power generating facilities and has distinguished itself as a leader in energy development. All of us at Sithe are proud that together we have delivered significant value to our shareholders. I am confident that Sithe and its employees will benefit from working closely with PECO Energy, one of the country’s leading energy companies.”

McNeill said the purchase is expected to be earnings neutral to positive through 2002, and highly accretive thereafter. “We anticipate significant earnings contribution beginning on 2003,” he said.

“This transaction,” he added, “clearly helps accelerate our generation strategy and asset-based trading capabilities, and it puts us in a very strong position to achieve our goals that will sustain our growth beyond 2003.”

The acquisition is conditioned on approval by the Federal Energy Regulatory Commission, the Securities and Exchange Commission, and state regulatory proceedings.

Credit Suisse First Boston acted as exclusive financial advisor to PECO Energy.

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