Filed by Public Service Enterprise Group Incorporated
Pursuant to Rule 425 under the Securities Act of 1933
and Deemed Filed Pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company:
Public Service Enterprise Group Incorporated
(Commission File No. 001-09120)
[PSEG LOGO]
Merger Q&A
A series of Q&As concerning the proposed merger
February 1, 2005
PLEASE PRINT AND POST FOR EMPLOYEES WITHOUT ACCESS TO E-MAIL
Corporate communications and human resources continue to work together to gather
employees' questions concerning the planned merger between PSEG and Exelon. We
will attempt to respond in a timely fashion. We recognize that information helps
ease uncertainties about change. However, please realize that some questions may
not have answers until later in the transition period.
Meanwhile, if you have a question, you can submit it by e-mail to
mergerquestions@pseg.com.
Q. Why does Exelon's website position the merger as an "acquisition," and what
are the differences between the two?
A. Exelon refers to this deal as an "acquisition" for financial accounting
purposes. However, this transaction truly is a collaborative undertaking between
Exelon and PSEG, reflecting qualities typical of a merger. When you examine this
deal, it has elements typical of a merger of equals and other elements usual for
an acquisition; Exelon is buying PSEG. For example, an exchange ratio, which
reflects a premium, is typical of an acquisition. The exchange ratio in the
current merger reflects a reasonable premium that allows the respective
shareholders of each company to share in the synergies made possible by the
combination of the two companies. When the merger becomes effective, former
shareholders of PSEG will represent about 32 percent of the shareholders of the
merged company, and former directors of PSEG will hold one third of the seats on
the merged company's board of directors.
Q. What are the key milestones for next steps for the merger? When will the
transition team be named?
A. The next steps in this merger include regulatory filings with the BPU and the
FERC. PSEG hopes to have completed both sets of filings within the next several
weeks. More information will be made available as filings are completed. Another
milestone will be the naming of the rest of the transition team. It is expected
that the team members will be announced within the next several weeks, as well.
Q. Do you really expect that this transaction will take 12 months? How long did
it take from the time they acquired PECO before employees were impacted?
A. It was initially announced that the transaction would take 12-15 months to
complete. While the regulatory process is somewhat unpredictable, both companies
are working together to set up timelines and processes to ensure that we can
meet this target. If past history serves as a guide, in September 1999,
Commonwealth Edison's parent company, Unicom, announced its intent to merge with
PECO to form Exelon Corp. This merger was completed in October 2000 - 13 months
later.
Q. As an employee of PSEG and a stockholder, will there be a vote for the
shareholders as far as the sale of PSEG?
A. Remember, owning stock in a company represents an ownership interest in that
company. So the answer is "Yes," the merger is contingent on the approval of the
respective stockholders of each of PSEG and Exelon, who will be required to vote
prior to its closure.
Q. What is the outlook for PSEG Energy Holdings after the merger? Will the
company be managed as a standalone subsidiary or folded into Exelon's existing
structure?
Energy Holdings is continuing to implement its strategy, approved by the PSEG
board in the summer of 2003, of reducing the company's international exposure.
There currently is no timeline associated with this effort. In 2004, Energy
Holdings earned $125 million and produced just under $1 billion in cash, of
which $350 million was used to retire debt and $475 million was returned to
Enterprise. The portfolio is earnings and cash positive, so we have the luxury
of selling assets when the timing is right to maximize the value of our
portfolio. It is too early to say how, or where in the company structure, the
investments would be managed post-merger.
Q. For FERC approval, is it true that the company will have to sell off
thousands of megawatts of fossil assets? If so, are all of the gen stations in
both companies up for potential sale or just those in the northeast? PJM only?
Illinois? Any of the above? When will the proposal to FERC be made public? In
the event that the need arises to sell off any of the company's fossil units due
to regulatory compliance issues, what is the protocol for the employees of those
locations? Do the employees accompany the asset with the sale or are they
retained by the company for reassignment? Is there is a planned sale date?
A. Exelon Chairman and CEO John Rowe indicated - both when the merger was
announced and in subsequent comments - that there may be a need to respond to
market power concerns by selling some fossil assets and/or auctioning a certain
amount of output from nuclear assets (nuclear output, not the plants
themselves). It is our understanding that the merger approval filing with the
FERC, which should occur around the end of January, will contain a market power
mitigation plan.
We are not sure at this time if the mitigation plan will actually identify
specific plants that, once the merger is completed, Exelon plans to sell or,
rather, simply identify the market (e.g., PJM), and the number of megawatts to
be either divested or auctioned. When the FERC filing is made, it will become
public information and we will make it available to employees at that time.
The divestiture process does not have to be completed prior to the merger
closing. The new, combined generation company will be the entity that divests
the MWs necessary to satisfy the FERC's market power concerns.
Regarding the future of employees at those plants effected, that decision would
be made by whichever entities acquire the assets. As a point of reference, when
PSEG Power acquired the Albany plant and its units in Connecticut, most workers
at those facilities were offered employment with PSEG.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, statements about the benefits of the business combination
transaction involving Public Service Enterprise Group Incorporated and Exelon
Corporation, including future financial and operating results, the combined
company's plans, objectives, expectations and intentions and other statements
that are not historical or current facts. Such statements are based upon the
current beliefs and expectations of Public Service Enterprise Group
Incorporated's and Exelon Corporation's management, are subject to significant
risks and uncertainties and may differ materially from actual future experience
involving any one or more of such matters. Actual results may differ from those
set forth in the forward-looking statements. The following factors, among
others, could cause actual results to differ from those set forth in the
forward-looking statements: the timing of the contemplated merger and the impact
of any conditions imposed by regulators in connection with their approval
thereof; the failure of Public Service Enterprise Group Incorporated and Exelon
Corporation stockholders to make the requisite approvals for the transaction;
the risk that the businesses will not be integrated successfully; failure to
quickly realize cost-savings from the transaction as a result of technical,
logistical, competitive and other factors; the effects of weather; the
performance of generating units and transmission systems; the availability and
prices for oil, gas, coal, nuclear fuel, capacity and electricity; changes in
the markets for electricity and other energy-related commodities; changes in the
number of participants and the risk profile of such participants in the energy
marketing and trading business; the effectiveness of our risk management and
internal controls systems; the effects of regulatory decisions and changes in
law; changes in competition in the markets we serve; the ability to recover
regulatory assets and other potential stranded costs; the outcomes of litigation
and regulatory proceedings or inquiries; the timing and success of efforts to
develop domestic and international power projects; conditions of the capital
markets and equity markets; advances in technology; changes in accounting
standards; changes in interest rates and in financial and foreign currency
markets generally; the economic and political climate and growth in the areas in
which we conduct our activities; and changes in corporate strategies. While we
believe that our forecasts and assumptions are reasonable, we caution that
actual results may differ materially. We intend the forward-looking statements
to speak only as of the time first made and we do not undertake to update or
revise them as more information becomes available. Additional factors that could
cause Public Service Enterprise Group Incorporated's and Exelon Corporation's
results to differ materially from those described in the forward-looking
statements can be found in the 2003 Annual Reports on Form 10-K, and Quarterly
Reports on Form 10-Q for the quarterly period ended September 30, 2004, and
Current Reports on Form 8-K on December 21 and December 20, 2004, of Public
Service Enterprise Group Incorporated and Exelon Corporation, as such reports
may have been amended, each filed with the Securities and Exchange Commission
and available at the Securities and Exchange Commission's website, www.sec.gov.
This communication is not a solicitation of a proxy from any security holder of
Public Service Enterprise Group Incorporated or Exelon Corporation. Exelon
Corporation intends to file with the Securities and Exchange Commission a
registration statement that will include a joint proxy statement/prospectus and
other relevant documents to be mailed by Public Service Enterprise Group
Incorporated and Exelon Corporation to their respective security holders in
connection with the proposed merger of Public Service Enterprise Group
Incorporated and Exelon Corporation. 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 PUBLIC SERVICE
ENTERPRISE GROUP INCORPORATED, EXELON CORPORATION 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 Securities and Exchange
Commission free of charge at the Securities and Exchange Commission'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 Public Service
Enterprise Group Incorporated, Investor Relations, 80 Park Plaza, P.O. Box 1171,
Newark, New Jersey 07101-1171, or from Exelon Corporation, Investor Relations,
10 South Dearborn Street, P.O. Box 805398, Chicago, Illinois 60680-5398.
Participants in Solicitation
Public Service Enterprise Group Incorporated, Exelon Corporation, their
respective directors and executive officers and other persons may be deemed to
be participants in the solicitation of proxies in respect of the proposed
transaction. Information regarding Public Service Enterprise Group
Incorporated's directors and executive officers is available in its proxy
statement filed with the Securities and Exchange Commission by Public Service
Enterprise Group Incorporated on March 10, 2004, and information regarding
Exelon Corporation's directors and executive officers is available in its proxy
statement filed with the Securities and Exchange Commission by Exelon
Corporation on March 12, 2004. 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
SECURITIES AND EXCHANGE COMMISSION WHEN THEY BECOME AVAILABLE.