BGE, Pepco merger vote is March 29 Shareholders' acceptance key to creating 9th-largest power concern in U.S.

Utilities

February 14, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Shareholders of Baltimore Gas and Electric Co. and Potomac Electric Power Co. will vote March 29 on the utilities' proposed $2.9 billion merger, which received a blessing from the Securities and Exchange Commission last week.

The meetings -- stockholders are expected to receive proxy statements within days -- will be the first public address concerning the merger by either BGE or Pepco executives since the deal was announced in September.

By combining into Constellation Energy Corp., BGE and Pepco plan to create the nation's ninth-largest power concern, with annual revenues reaching $5 billion and assets of $15.4 billion.

"It will create a larger, stronger company well-positioned to grow, prosper and take advantage of future strategic opportunities in an increasingly competitive environment," the proxy statement says.

"BGE and Pepco believe that the merger will provide opportunities to achieve benefits for their respective shareholders, customers, employees and communities that would not be available if they were to remain separate companies."

Constellation expects by 2007 to save $1.3 billion, through the elimination of 1,300 jobs -- or 10 percent of its combined work force -- and other duplicate functions and administrative costs.

The new entity also plans to improve its power generation mix and centralize its purchasing process.

The Securities and Exchange Commission's blessing -- a formal approval was not required, but the SEC's decision to send the proxy back to the companies after its review technically signifies its approval -- marks the first in a series of federal approvals required before Constellation Energy can become reality, as expected in March 1997.

The new company will also have to win the approvals of the Federal Energy Regulatory Commission, the Justice Department, the Federal Trade Commission and the Nuclear Regulatory Commission, because BGE owns and operates the Calvert Cliffs nuclear power plant.

The SEC defers to FERC on competition issues, according to Economists Inc., a Washington consulting firm specializing in utility issues.

Various state regulatory bodies, including the respective Public Service Commissions in Maryland, Washington and Virginia, also must sign off on the corporate marriage.

The meetings, in which stock owners also will vote on proposed long-term incentive plans for executives, will be held at 10 a.m. at BGE's downtown headquarters at 39 W. Lexington St. and, in Pepco's case, at the Washington Four Seasons Hotel, at 2800 Pennsylvania Ave. N.W.

The votes will require approval of holders of two-thirds of each company's shares.

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