Shares of Pepco Sharply Higher by 17% After Exelon, Down 3%, Earlier Acquired the Co. for $27.25/Share

Exelon Corporation

and Pepco Holdings Inc.

today announced that they have signed a definitive agreement to combine the two companies in an all-cash transaction. The agreement, which has been unanimously approved by both companies' boards of directors, brings together Exelon's three top-performing electric and gas utilities – BGE, ComEd and PECO – and Pepco Holdings' electric and gas utilities – Atlantic City Electric, Delmarva Power and Pepco – to create the leading Mid-Atlantic electric and gas utility. The combined utility businesses will serve approximately 10 million customers and have a rate base of approximately $26 billion. The transaction will further expand Exelon's regulated holdings, ensuring a balanced earnings mix as power prices recover. Exelon President and CEO Chris Crane said, “Exelon and Pepco Holdings have a compelling strategic rationale for merging, given our geographic proximity and similar utility business models. Our cultures are an excellent match, with a shared focus on operational excellence, environmental stewardship, customer service and support for the communities we serve.” Pepco Holdings Chairman, President and CEO Joseph M. Rigby, said, “This combination provides significant benefits for all of our stakeholders, including customers, employees and shareholders. Exelon is one of the most respected energy companies in the country, and it is committed to building on the progress our team has made over the last few years to improve system reliability and customer satisfaction. As part of this transaction, Exelon has committed to provide what our customers most want: investments in infrastructure improvements, continuation of our long tradition of philanthropy in our communities and direct customer benefits of $100 million. Our shareholders will benefit from an immediate cash premium, and employees should enjoy even more opportunities as part of a larger company.” Rigby added that being part of a family of large urban utilities with distinguished emergency response capabilities will be of enormous value to the Pepco Holdings utilities and their customers during major storms. Commitment for Increased Reliability As part of the acquisition, Exelon and Pepco Holdings have committed to build on the significant improvements to service reliability that Pepco Holdings has already achieved for Atlantic City Electric, Delmarva Power and Pepco customers. This commitment is backed by the strong reliability performance of the current Exelon utilities. ComEd and PECO are delivering first-quartile performance, and BGE's reliability metrics have risen to their best-ever levels since BGE joined Exelon in 2012 and are just shy of first quartile. Other Benefits to Electric and Gas Customers In addition to reliability improvements, upon completion of the transaction, Exelon will provide an aggregate $100 million – equivalent to approximately $50 per customer – for a Customer Investment Fund to be utilized across the Pepco Holdings utilities' service territories as each state public service commission deems appropriate for customer benefits, such as rate credits, assistance for low income customers and energy efficiency measures. Exelon has also pledged to maintain charitable contributions in the Pepco Holdings service territories at Pepco Holdings' highest-ever level for at least a decade, a total commitment of $50 million. Terms of the Transaction The all-cash transaction consideration of $27.25 per share represents a 24.7 percent premium to Pepco Holdings' closing price of $21.85 on April 25, 2014, and a 29.5 percent premium to the volume–weighted average share price over the last 20 trading days (ending April 25, 2014). The acquisition is anticipated to be significantly accretive to Exelon's adjusted earnings in the first full year after closing. Financing The transaction is supported by a fully committed $7.2 billion bridge facility with Barclays and Goldman Sachs. Exelon expects the permanent financing plan to include a combination of Exelon equity issuance, long-term debt and corporate cash. The timing of the permanent financing is subject to a number of factors, including but not limited to market conditions. Leadership and Headquarters Crane will remain president and CEO of the combined company. Rigby, who previously announced his planned retirement, will remain in his current roles with Pepco Holdings until the closing of the transaction. Exelon is headquartered in Chicago. As is the case with BGE in Baltimore, ComEd in Chicago and PECO in Philadelphia, Pepco Holdings utilities will retain their regional headquarters in May's Landing, N.J. (Atlantic City Electric), Newark, Del. (Delmarva Power), and Washington, D.C. (Pepco). All utilities will remain focused on safety, customer service, reliability and infrastructure investment within their jurisdictions, while they work together to share best practices to continually improve performance for customers. Approvals and Timing The transaction requires the approval of the stockholders of Pepco Holdings. Completion of the transaction is also conditioned upon approval by the Federal Energy Regulatory Commission, the District of Columbia Public Service Commission and several state commissions including the Delaware Public Service Commission, the Maryland Public Service Commission and the New Jersey Board of Public Utilities. The transaction is also subject to the notification and reporting requirements under the Hart-Scott-Rodino Act and other customary closing conditions. The companies anticipate closing in the second or third quarter of 2015. Advisors Barclays, Goldman, Sachs & Co. and Loop Capital Markets are serving as financial advisors and Kirkland & Ellis LLP is serving as legal counsel to Exelon. Lazard provided a fairness opinion and served as lead financial advisor to Pepco Holdings, Morgan Stanley provided a fairness opinion to the Pepco Holdings Board of Directors and Sullivan & Cromwell LLP and Covington & Burling LLP served as legal counsel to Pepco Holdings. Conference Call & Webcast Crane and Rigby will discuss the transaction on a one-hour conference call with the financial community during the timeframe for Exelon's scheduled earnings call: 11 a.m. EDT (10 a.m. CDT) Wednesday, April 30. The call-in number in the U.S. and Canada is 800-690-3108, and the international call-in number is 973-935-8753. If requested, the conference ID number is 14743663. Media representatives are invited to participate on a listen-only basis. The call will be webcast and archived on Exelon's and Pepco's websites: www.exeloncorp.com and www.pepcoholdings.com (select the Investors page of either site). Telephone replays will be available starting two hours after the call ends and until May 14, 2014. The U.S. and Canada number for replays is 800-585-8367, and the international number is 404-537-3406. The conference ID number is 14743663. A live audio webcast on the Investor Relations page of Exelon's website (www.exeloncorp.com) will also be available. It will be archived and available for replay two hours after the conference call ends.