1
Exhibit 99.2
NEWS RELEASE
[LOGO]
Contact: Investor Relations, Bob Marshall (302) 429-3114
Public Affairs, Mary Rucci (302) 429-3334
CONECTIV ANNOUNCES STRATEGIC AND FINANCIAL INITIATIVES FOR GROWTH
SHARE BUYBACK, DIVIDEND REDUCTION, SALE OF GENERATING ASSETS,
GROWTH IN TELECOMMUNICATIONS AND UTILITY
BUSINESSES, MAJOR COST REDUCTION EFFORTS
WILMINGTON, May 11, 1999 -- With its major regulatory issues becoming more
certain, Conectiv (NYSE:CIV and CIV.A) today announced several strategic
initiatives designed to increase shareholder value and position Conectiv for
future growth. These initiatives continue to expand Conectiv's focus on
achieving superior total shareholder returns by providing improved earnings
growth. The growth focus is in Conectiv's utility transmission and distribution
business, investments in its telecommunications business and higher returns on
the strategic energy business.
The initiatives include:
- - A recapitalization of Conectiv through a buyback of approximately 14
percent of outstanding common stock in order to employ a more efficient
capital structure appropriate for a competitive environment;
- - An intention by the Board of Directors to reduce the quarterly CIV common
stock dividend from $0.385 to $0.22, to balance total shareholder return
between stock appreciation and dividend yield. The dividend policy for
Class A Common Stock remains unchanged, currently a quarterly dividend of
$.80 ($3.20 annualized) per share;
- - A realignment of Conectiv's generation business by pursuing the potential
sale of approximately 2,200 megawatts of nuclear and non-strategic baseload
fossil generation, with safeguards to assure continued energy reliability;
(more)
2
- - A focus on value creation through growth of Conectiv's regulated electric
and gas delivery business, its energy business and telecommunications
business;
- - The implementation of a new productivity improvement and cost reduction
program aimed at positioning the company to have a more competitive cost
structure without any reduction in quality and service.
"This accelerates Conectiv's progression toward being a leading provider of
vital services to customers in an expanded regional market. The first step of
this journey was the merger of Delmarva Power and Atlantic Energy to create
Conectiv. The second was the deregulation of the energy markets in the areas we
serve. Third, we created a number of new businesses. This is the next step in
the transformation of Conectiv from a regulated to a highly competitive
enterprise," explained Howard Cosgrove, Conectiv Chairman, CEO and President.
DIVIDEND POLICY AND RECAPITALIZATION
In order to improve Conectiv's financial flexibility and position it as a
growth-oriented investment, Conectiv's Board of Directors intends to reduce its
CIV common stock dividend and recapitalize its balance sheet. The dividend
policy remains unchanged for the Class A common stock.
The Board intends to reduce the CIV common stock dividend from $1.54 to $0.88,
effective with the expected declaration of the next quarterly dividend, on June
29, 1999.
According to John van Roden, Conectiv's CFO, "The company is targeting a payout
ratio of 40% to 60%. This is more consistent with companies operating in a
competitive environment, and transitions Conectiv away from the traditionally
higher payout ratios typical of the regulated utility industry."
The recapitalization will be accomplished through a "Dutch Auction" self-tender
offer, beginning May 11, 1999 and ending June 8, 1999. Conectiv plans to buy
back up to 14 million of its outstanding CIV common shares. Shareholders will
have the opportunity to tender their shares within a price range established by
the Company of $23.50 to $25.50.
The recapitalization will not affect the capital structures of Conectiv's wholly
owned subsidiaries, Delmarva Power & Light Company and Atlantic City Electric
Company. The transaction will be financed through the issuance of long- and
short-term debt of Conectiv, with the consolidated credit ratios expected to
return to current levels within 2-3 years, as the result of the lower annual
dividend payout and anticipated receipt of cash from asset sales.
(more)
3
Van Roden emphasized, "We are positioning Conectiv's stock for market value
growth. With our solid earnings prospects, and the effect of reduced shares
outstanding, Conectiv is positioned to achieve improved growth in earnings per
share."
Cosgrove further noted "We believe our tender offer will allow those
shareholders who desire a more income-oriented investment to exit on favorable
terms. On the other hand, we believe that shareholders who retain their shares
will benefit from owning a greater interest in a highly competitive company with
outstanding growth opportunities."
SALES OF GENERATING PLANTS
In response to changes in the legal and regulatory environment in the states
that it serves, Conectiv plans to sell approximately 2,200 megawatts of its
nuclear and non-strategic baseload fossil generation assets.
Cosgrove explained, "This sale will accomplish two main goals. First, it will
raise case for debt repayment and new investments more likely to fulfill our
corporate vision. Second, we will realize gains that offset our stranded costs
from generation plants. Conectiv intends to retain certain generation plants
that it considers to be strategic to its energy business and assure reliability
for its customers throughout the evolution of the competitive electric supply
markets.
"This approach reflects our belief that we must concentrate on becoming a
provider of multiple vital services under a common brand, rather than use our
generation resources to compete in the commodity wholesale business," Cosgrove
said.
Conectiv's generating asset divestiture is expected to occur upon acceptable
terms by midyear 2000. Conectiv will work with its affected employees to provide
as many opportunities as possible.
STRATEGIC FOCUS
The foundation of Conectiv's growth opportunities is its energy,
telecommunications and regulated electric and gas delivery. These areas comprise
the company's vital services focus and allow Conectiv to concentrate on
deepening customer relationships within its growing region.
The energy business will be centered on 2,000 megawatts of flexible, low-cost
generation that back Conectiv's merchant capabilities. Conectiv also will focus
resources on growing its facilities-based telecommunications business, taking
advantage of the many high growth opportunities including internet and high
speed DSL (digital subscriber line) that will be available to customers later
this year.
"Conectiv Communications today has more than 50,000 access lines and has
achieved dramatic growth in a short time. We are excited about continuing that
growth," stated Cosgrove. "At the same time, the regulated electric and gas
delivery business will provide continued strong cash flows and will be the basis
for expanded vital services growth beyond regulated delivery. In conjunction
with our delivery business,
(more)
4
Conectiv will continue to be a major provider of energy throughout the
Mid-Atlantic region."
PRODUCTIVITY IMPROVEMENT AND COST REDUCTIONS
Conectiv has simultaneously initiated a comprehensive cost improvement program
with a renewed focus on improving productivity and continuing merger synergies
in its core business processes with a goal of $25 million in cost reductions
over the next 12 to 18 months. Over the longer term, the company plans to review
all business processes and expenses to accelerate process improvements and
achieve cost productivity that can be sustained.
"In order to compete in a deregulated environment, we must continuously reduce
costs and improve productivity without any reduction in quality and service or
impact to our customers as we continue to grow. This type of effort and
coordination will enable Conectiv to develop sustainable benefits in a
competitive marketplace," Cosgrove stated.
SUMMARY
Van Roden summarized the goals of the strategic and financial initiatives
announced today by saying that they "should provide Conectiv with sufficient
funds to invest in the areas of strategic focus that provide higher return on
equity and earnings accretion, while maintaining a prudent balance between debt
and equity in our capital structure. This action also should preserve the
financial flexibility necessary to accommodate future cash needs and focus on
improving total shareholder return."
Cosgrove added, "Today's announcement is the next step in Conectiv's
transformation from a regulated public utility to a regional provider of vital
services. It is a course of action that is consistent with both our strategic
focus and is in the best interests of our shareholders and customers. The
current repayment of capital to shareholders is a tangible expression of the
Board's and management's confidence in the Company and provides greater
assurance to shareholders that strategic undertakings will be value-enhancing."
Conectiv is a regional provider of vital services, emphasizing electric and gas
delivery, energy and telecommunications.
************************************
The dealer manager for the share repurchase offer is The Blackstone Group, L.P.
The information agent is D.F. King & Co., Inc. Copies of the Offer to Purchase
and related materials, dated May 11, 1999, will be mailed to all Conectiv
shareholders. The terms of the offer and procedures for tendering are explained
in detail in these materials. Shareholders are urged to carefully read these
materials prior to making any decision with respect to the offer. Additional
copies of the material can be obtained from the information agent by calling
1-800-207-3156.
(more)
5
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Litigation
Reform Act") provides a "safe harbor" for forward-looking statements to
encourage such disclosures without the threat of litigation, provided those
statements are identified as forward-looking and are accompanied by meaningful,
cautionary statements identifying important factors that could cause the actual
results to differ materially from those projected in the statement.
Forward-looking statements have been made in this Press Release. Such statements
are based on beliefs of the Company's management ("Management") as well as
assumptions made by and information currently available to Management. When used
herein, the words "will," "anticipate," "estimate," "expect," "objective," and
similar expressions are intended to identify forward-looking statements. In
addition to any assumptions and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause actual
results to differ materially from those contemplated in any forward-looking
statements include, among others, the following: deregulation of energy supply
and the unbundling of delivery services; an increasingly competitive
marketplace; results of any asset dispositions; sales retention and growth;
federal and state regulatory actions; future litigation results; costs of
construction; operating restrictions; increased costs and construction delays
attributable to environmental regulations; nuclear decommissioning and the
availability of reprocessing and storage facilities for spent nuclear fuel; and
credit market concerns. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. The foregoing list of factors pursuant
to the Litigation Reform Act should not be construed as exhaustive or as
admission regarding the adequacy of disclosures made by the Company prior to the
effective date of the Litigation Reform Act.
###www.conectiv.com###