ML18101B330

Atlantic Energy 1995,Summary Annual Rept.

ML18101B330
Person / Time
Site:	Salem, Hope Creek
Issue date:	12/31/1995
From:	Huggard E, Jo Jacobs ATLANTIC ENERGY, INC.
To:
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ML18101B327	List: ML18101B326 ML18101B328 ML18101B329 ML18101B330
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NUDOCS 9604190178
Download: ML18101B330 (40)

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• The same power company that turns things on is shaking things up.

Financial Highlights ATLANTIC ENERGY EARN INGS AND DIVIDENDS PAID PER SH ARE OF COMMON STOCK 2 1.80  % Change  % Change  % Change 1.67 1995 1995-1994 1994 1994-1993 1993 1993-1992 1.53 l.54 l.55 1.54 1.49 LSI 1.5 1.41* Earnings Per Common Share $ 1.55 9.93 $ 1.41 * (21.7) $ 1.80 7.8 DiviJends Paid Per Common Share $ 1.54 $ 1.54 0.7 $ 1.53 1.3 Book Value

.5 Per Common Share $ 15.48 (0.5) $ 15 .56 (0.4) $ 15.62 3.0 Number of Common Shares Outstanding-0 Year-end (000)

• 9 1 92 93 EARN INGS D IVIDENDS Earnings per share of Common Stock 94 95 Average Actual Return on Average 52,815 52,532 (2.5)

(3.0) 54,149 54, 155 2.4 1.2 52,888 53,507 2.5 2.5 Common Equity 9.88% 8.9 9.07%* (22.5) 11.71% 5.1 is nee income divided by rhe average number of common shares owsranding. Electric Operating Dividends paid per share is the si<m of the quarterly dividend payments made m Revenues (000) $ 953,137 4.4 $ 913,039 5.5 $ 865,675 6.0 Jamtar)', AIJTil, Jul~ and October. Operating Expenses (000) $ 804,600 5.9 $ 759,499 7.6 $ 706,091 3.9 Net Income (000) $ 81,768 7.4 $ 76,113* (20.l) $ 95,297 10.5 ATLANTIC ENERGY Uti lity Cash MARKET PRI CE PER SHARE Construction OF COMMON STOCK Expenditures (000) $ 100,904 (15.9) $ 119,961 (13. l) $ 138,111 25 $2,620,896 2.4 $2,5 45,5 55 2.3 $ 2,487,508 l 2. 1 23.IJ Total Assets (000)

!US 20.50 Sales of Electricity to 17.63 19.25 20 Ultimate Customers (KWH) (000) 8,052,865 (1.4) 8, 167 ,856 1.3 8,066,4 l 2 5.4 15 Price Paid Per Kilowatt-hour (Ultimate C ustomers) 11.213¢ 5.7 10.6 10¢ 2.8 10.316¢ 0.6 10 Total U ltimate Electric-Customer Accounts (Year-end) 473,588 1.0 468,7 12 1.2 463 ,073 1.0 5

Number of Shareholders-0 Common Stock (Year-end) 48,683 (0.3) 48,850 2.1 4 7,832 2.8

• 9 1 92 93 94 95

' Number of Atlantic This is the closing price of Atlantic Electric Employees 1,455 ( 18.9) 1,794 (2.2) 1,835 (9.3)

(Year-end)

Energy's Common Stock on the last trading day of each year, as reported by the New York Stock Exchange *rdll'clS 1lJk'-llnlC 1.:haq,:l'S of $0. n per share , primarily for employee :->epar::ltion ClhtS Composite Transacrions listing.

A tlantic Energy, Inc. is th e parent holding compan y for Atlant ic C ity Electric Compan y (A tl anti c Elec tri c) and A tlanti c Energy Enterpri ses (A EE). A tlantic Electric, a regulated elec tric utility, is the compan y's co re business and makes up 94% of total asse ts. Atl anti c Elec tri c se rves more than 4 73,000 customers in a 2,700-square- mile area in south ern New Jersey. More th an 98% of the u ~

customers are homes and small businesses. A EE is th e ho lding co mpa ny fo r A t ~

Energy's non-regul ated businesses. Together, the two subsidiari es are ca rrying out A tlanti c Energy's mission to become a co mpetiti ve energy co mpany th at offers customers a full spectrum of prod ucts and se rvices.

To you, our shareholders:

Success in today's electric utility industry is all abo ut nav igating change and finding smarter ways to run your business. A glance at our cover may have given yo u some idea that things are indeed changing at A tlantic Energy. In 199 5 we continued to move fo rward with our plans to create an energy company that will compete profitably in the rapidly changing en ergy industry. Al ong the way we've met some diffi cult ch allenges, but we've also made some hard -earned progress. We' re wo rking h arder than ever to grow n ew markets, improve productivity and customer service and cut costs - all important efforts that are preparing us fo r deregulation and intensi-fi ed co mpetitio n.

1995 's Financial Perfo rmance O ur financial perfo rmance during 1995 clearl y did not meet our expectations - we earned $ 1.55 per share, a decline from the $ 1.78 per share earned fro m operations last year, before 1994's one-time $0.3 7 adjustment. Dividends paid, plus share price appre-ciation during 1995 , yielded a total return of 18.0%.

Certainly a fa ir return, but we did not keep pace with W~c!11~d ]. L. Jacobs E. D. Hugga rd many of o ur pee r utiliti es.

President & C hairman of the Board C hief Executi ve Officer ( cont'd) 1995 operation and maintenance (O&M) expenses for our core utility business were reduced by more than $8 million , a 4 percent reduction from last year's mark. The mos t significant savings were achieved through a utility downs izing program that trimmed the work force by close to 300 employees . Core O&M expenses are expected to remain flat over the next three- to five-year period.

A tlantic Energy

We are not, and will not be satisfied with these kinds of in the new marketplace. Our five-year strategic pla, results. A very mild winter and spring held back earnings called AE2000, initiated last year, is setting the course through the first half of '95 and the summer's air condi- for our transformation. The plan calls for enhancing tioning load was not robust enough to help us make up the efficiency and profitability of our core electric the lost ground. Electric sa les in 1995 were 1.4% off 1994 utility business while developing growth and profit levels. O ther factors contributing to the 199 5 earnings opportunities in new energy- related markets. The decline include the add itional expenses related to the pages that follow our letter detail some of the strides prolonged outage at Salem Nuclear Station and the we've made in carry ing o ut our AE2000 plans.

continuation of the economic initiative cred it included As we move toward full competition , we antic ipate in our energy clause rates. While the cred it helps us make continued pressure and vulnerability with regard to our our rates more competitive, it did have a significant earnings outlook. We will regu larly evaluate the level effect on earnings in 1995 . We do not expect to renew of our common stock dividends in relation to o ur finan-the credit in our next fuel adjustment rate request. cial performance. We are mindful of our shareholders' Overall, our nonutility activities resulted in a loss of $0.04 traditional reliance on steady div idend income.

per share in earnings . Included in our nonutility results is Competing with that priority, however, is the need to a $0.0 1 per share loss from Atlantic Energy Enterprises, have enough financial flexibility to respond quickly to (AEE), reflecting the start-up mode of some of their busi- emerging market opportunities or threats. And as we nesses. Looking to the future, all Atlantic Energy com- wrote in last year's letter, one way to ga in that fie.

panies will play significant roles in our work to expand bility is to pay out a relatively smaller portion of our the number of energy options we can offer our customers earnings in dividends. We expect to dedicate increas ing as we ll as broaden o ur sources of earnings. amounts of resources to new opportunities that will Our Competitive St rategy grow our business, and in turn, increase our earnings.

The deregulation of the electric utility industry is and Our intent is to carefully balance our dividend and will continue to be the single greatest factor influencing business growth commitments, creating the greatest our future. It will be the marketplace - not the regu lators value for o ur sh areh olders.

- that will ultimately dictate the pace and extent to Building Strong Customer Relationships which the industry changes. A s competition takes To compete in the future, we know we must work now hold, we want to be in a pos ition to compete and win to build stronger relationships with our customers.

• The Company continues to take advantage of the

• A tlantic Generation Inc. (AGI) turned in a solid financial 1ower prevailing interes t rates by refinancing performance in 1.995. The nonutility power producer con-higher-cos t debt . In 1995 two bond issues were tributed $0 .05 per share to consolidated earnings . AGI's redeemed or refinanced, saving the company more business p1ans caUfor adding to its current portfolio of thrA than $ 1 miUion per year in interes t expense . Over the cogeneration plants. 'W 1ast three years more than $430 miUion of the company's 1ong-term debt has been refinanced.

We're assuming our largest business customers will be among the first to have the freedom to choose their energy supplier. We know th at will happen, but can 't pre-dict exactl y when. O ur plan is to be full y prepared fo r com-petition right around the turn of the century. That's why we' re developing new prod ucts and services that create new sources of revenue while making A tlan tic Energy a much more important facto r in our customer's day-to-day lives and businesses. N ew services like high vo ltage equip-ment maintenance and efficient ligh ting design and instal-lation place us on the customers' ide of our meters and demonstra te how we can contri bute to their profitability.

Our N ew Gas Marketing Venture We wo n't always be going it alone as we expand our port-fo lio of product offerings . We've learned that it can be a grea t advantage to partner with a business that has proven experience in a new market. For instance , earl y in 1995 we estab lished a strategic alliance with a subsidi ary 3

of orthern States Powe r of Minnesota - one of the country's most progress ive gas and electri c utilities . With them, we have created A tlantic CN RG Services, LLC (ACN RG ), and are selling natura l gas services to com-mercial and small industrial businesses in severa l regions of the Northeast. Since our partner already had a foo t in the market, we were able to get the business up and run -

ning in a remarkably short period of tim e. We're looking fo r ACN RG to grow stead ily in the co ming yea r.

Achieving our vision of becoming a full-service Our search for smarter work practices and cos t-energy compan)' will depend on building cutting measures led us to partner with our union exce llent relationships with our customers. to create more flexible work rules and broader job Pictured above, Atlancic Electric President descriptions at our poiver plants. Day-to-day tasks and C hief Operating Officer Mike C hesser that once required the involvement of as many as talks to customer service representatives about three employees can now be handled by just one some new initiatives that will sup/Jort them in multi-tasked worker.

their da)*- to-da)' interactions with customers .

Atlantic Energy

Competing on Price Managing Regulatory Issues New products and strong customer relationsh ips will The complex process of utility deregulation is expected on ly be part of the competitive so lution. We must also to occur primarily lll1 a state-by -state basis. States make the price of our primary product - electricity - more across the U .S., including New Jersey, are taking a hard attractive in order to meet the threat of competition . look at the traditiunal regulations that govern the We're making exce llent headway in getting our internal industry and are devdoping new standards that better cost structu re in order. By doing things like trimming reflect the realities of the marketplace. Memhers of close to a third of ou r utility work fo rce over 3 yea rs, our corporate leadership are playing key mks in the ren ego tiat ing fuel supply contracts and creat ing New Jersey Board of Public Utilities' (BPU's) ongoing ground-breaking partnerships with our unio n , we're Energy Master Plan Proceeding. One of the most making electricity a better va lue for customers. We critical questions being addressed in the proceeding is also expect to offer customers, on a very limited basis, the extent to which New Jersey's utilities will he able price discounts currently permitted under New Jersey's to recover long-term investments anJ commitments n ew flexibl e ratemaking laws. prudently made and placed into dectric rates under the traditional regulatory compact. We firmly hdieve S ignificant cost challenges still lie ahead of us, partic-our regulators and lawmakers must build in a transi -

ularly in the area of power generat ion and supply. The tion period to provide for renJVery of our investments power purchase contracts we have with our independent as we move toward open competition. To date, ot' power producers (IPPs) are pushing our rates well above jurisdictions grappling with this same issue, includmg prevailing market levels. Serious talks with the project the Federal Energy Regulatory Commission, appear to owners continue with the goa l of achieving further cost he in alignment with our position. Whik the BPU reductions. One pos itive outcome of our talks has been hasn't yet made any formal pronouncements, we are the restorat ion of GEON, a chemical manufacturer, as a pleased with the thoughtful and ddiherate manner in full customer. An agreement reached with ano ther !PP which they are handling this very important process.

calls for the return of Monsanto .

Growth In Our Service Territory When we take inventory of the strengths that set us apart from other utilities, the quality of our service territory always tops the list. We're very optimistic

• New Jersey's utility regulators are working closely

• Developers and investors continue to show strong interest with the state's electric utilities to create a smooth in Atlantic City. In mid-1995 , Steve Wynn of Mirage transition to a market-driven environment. The Resorts announced his intent to build a half-billion-dollar Board of Public Utilities' new flexible rate regulations casino and entertainment resort in the city's marina district.

give us the ability to respond to competitive threats The project could create thousands of new jobs as we1-by offering business customers, at our discretion, significant new business for Atlantic Energy.

customized or discount rate agreements.

about the growth t ren ds we' re see ing in several regio n s of o ur market. A tlantic C ity is unde rgoing a ren aissance t hat promises to make th e resort a premier to urist and en te rtainmen t attraction . A n ew con ve ntion cen te r, nu merous cas ino and h ote l expansions an d record cas ino profits are enhancing the city's appea l, as well as o ur own business opportun it ies in th e city. Atlan t ic A Personal No te ...

Thermal Systems, o ur th ermal en ergy subs id iary, will This year I will end my nearly 41 years of service with soon begin constructing a h eating and cooling system Atlantic Energy. I am fortunate to have enjoyed both a in A tlan t ic C ity to se rve t h e burgeoning cas ino an d challenging and rewarding career. The challenges were met, commerc ial distric t. To the wes t , we continue to experi -

and the rewards derived from the great association I shared ence growth in o ur ind ustria l and commerc ial sectors.

with the employees , directors , customers and shareholders M anufacturing an d d istri but io n fac ilities are c hoos ing of our company.

southern New Je rsey. They are attracted by ample roo m Now, more than any time in my experience, our to grow an d an exce llen t tran sportat ion infr astructure.

industry and our company are fac ing times requiring exceptional vision and strategic leadership. I believe Atlantic Over the nex t two to three yea rs we will be challenged Energy's leadership will successfully guide our corporation by the marketp lace in ways we neve r imag ined a

. gh the vas t changes and new opportunities that lie few short years ago. W e're confide nt we' re up for the ahead of us. challenge. Be assured that th roughout the process our A tlantic Energy is a fine company, and I am honored overriding objecti ve will be the max imization of sh are-to have served as its leader. I urge my fellow shareholders to holder value. In the pages that fo llow you' ll see h ow maintain their steadfas t support. I believe A tlantic Energy we're already shaking things up to create just the righ t has always endeavored to fairly reward you for your inves t- blend of innovat io n , growth an d q uality service to ment confidence and will continue to do so in the future. ac hieve tha t objec ti ve fo r yo u .

• Atlantic Energy gained a new business cus-tomer when Missa Bay moved its operations to southern New Jerse)'* The food distributor built a 50 ,000-square-foot facility that boasts a

• Post Script From Jerry Jacobs Our Chairman , Doug Huggard, will retire from our board of directors in April. O n behalf of my fe llow employees, board members and shareholders , I want to thank Doug for his state-of-the-art, 30 ,000-square-foo t re- nearly 41 years of fine service and leadership. His wisdom ,

frigeration-freezer area. Factors influencing vision and business sense have steadily guided us through Missa Bay's move included lower taxes and periods of tremendous growth and change . We' ll miss his energy expenses. valuable contributions and wish him a long and health y retirement. - ].L. Jacobs

The same power company that lights corridors is blazing new trails.

Inefficient lighting and pace condit ioning systems are energy guzzlers that can hrink a business' bottom line.

We've entered the growing energy services industry and are now marketing compr hensive efficiency solution to business and industry in outhern N ew Jersey and other regions of the Northeast. We're offering customer top-to- bottom energy efficiency audits, as well as des ign ,

construction and retrofit of new lighting and energy systems. We even prov ide project financing, so busines es don 't have to drain the ir own capital resources. For southern N ew Jersey firm s fac ing international competi-tion , or even competition from sister facilities in o ther states, lower operating costs help secure their future and e

valuable jobs h ere. And fo r A tlantic Energy, the strategic ben efits of this initiative are clear: we're competing head- to-head with energy service companies that are already propos ing efficiency programs to our own cus-tomers; we're expanding our business relationships with c usto mers and we're creating new revenue strea ms.

We' re replacing our computerized energy Our new International Procurement group management system (EMS) with state-of-the- worked to create a market for new and used art technology that will help us operate our electrical equipment in several developing generation and transmission equipment more regions of the world. In 1996 the team will efficient!)' into the next centur)'. The new EMS work to penetrate markets in the Far East.

will keep a closer watch on the limits of our power system and allow us to better manage our inves tments in equipment and labor.

Nighttime in Atlantic C ity i brighter than eve r - and it's not just the c ity's casinos that are c reating the inviting glow. We insta lled thousands of decorative street lights throughout the resort's parks, n e ighbo r-hoods and bo ulevards. S upported by fundin g from businesses and public agencies, man y of the city's main entranceways have been reb uilt with lu sh landscap in g a nd new street lighting. To h elp the projects run smoothl y, we've ta ken the lead in coo rdina tii;ig the complex job of burying severa l different utilities' cables underground a nd o ut of sight.

idewa lks and street com e rs in some of the c ity's o ldest ne ighbo rhood n ow shine with o rna me nta l street lamps, making them safer and more inviting for residents and vi itor . The centerp iece of the lighting projects promises to be the 16-square-block gateway corridor that will connect the new con ve n-tio n ce nte r with the boa rdwa lk. Sch ed ul ed fo r completion in 1997, the project will c reate a grand and spectacu larl y lighted e n tranceway to Atlant ic C ity.

During 1995 we installed approximately Our Atlantic City office was hired b)' the 1,800 NightGuard outdoor lights at our Showboat Hotel and Casino to coordinate the customers' businesses and homes, bringing the installation of all underground utilities needed for total number of lights leased under the program a new parking facility. The job was completed to 23 ,800. NightGuard lights /)roduce more in just eight weeks and in time for the busy than $6 million in annual revenue, while summer season.

providing security and convenience for our customers.

Atlantic Energy

The same power company that cools things down is heating up.

• W e' re constructing a thermal energy production plant in Atlantic City that, under a 30-year contract , will suppl)' heating and cooling services to the city's new convention center. The center is scheduled to open in the .a sj)ring of 1997 and will boast the largest W exhibition hall on the eas tern seaboard .

We think it's smart business to stick close to what we do best. That's why a ke y element of Atlantic Energy's growth strategy is to deve lop new businesses and products cl ose ly aligned with our core electric utility business. Atlantic Thermal System (ATS) , our ther-mal energy services subsidiary, i doing just that. ATS offers bus iness customers in southern ew Jersey and across the U.S. a spectrum of options - from operating and maintaining ex isting thermal energy fac iliti es to se lling th e customer thermal energy in the fo rm of chilled water and steam fo r industrial processes or to heat and coo l t heir bu il d ing .

Atlantic C ity's thriving hotel and cas ino industry is ATS' initial foc us. We're designing a centra l energy system th at will supply steam and chilled wate r to the city's mid -town cas ino and bu siness distri ct.

With major faciliti es like the Trump Plaza and the Trump Regency already under contract fo r the service, AT S expects to begin construction o n th e $88 millio n elec tric and n a tural gas powe red proj ect in mid - 1996.

• 1t's important to find a good balance between our business priorities and the environment.

That's why in June we donated 114 acres of undeveloped woodlands to the New Jersey

• A growing number of schools in outhJersey are choosing geo thermal heating and cooling systems. Eight schools , including two colleges, are enjoying the comfort and chapter of the Nature Conservancy. The efficienC)' of geothermal. Four more schools tract of land, located near our Cumberland are now installing sys tems . Geothermal Generating Stat ion , is adjacent to the systems help us trim power demand at onservancy's Manumuskin River Preserve peak times, while increasing year-round and increases its total size to 3 ,500 acres. electricity consumption.

Atlantic Energy _ _ _ _ ___.

The same power company that connects with you is building new bridges.*

Every business day more than 25,000 of our cu tamers pay the ir electric bill o r call us with question or requests. In many cases, customers base their opinions about our service quality on these routine connections.

During 1995 we c reated several programs that improve our efficiency and convenience. C u tamers can now pay their bills using a credit card o r by giving us approval to automatically debit the ir bank account. And they'll soon be able to use o ur convenient pay- by- phone service to pay their monthly electric bill - fo r less than the cost of a postage stamp. These new opti ons can save us, as well as our customers, time and money. We've also made

• it easier fo r customers to contact us by phone. Phone representatives who "tele-commute" fro m their homes offer quicker service during peak calling times and can staff the ir phones in a matter of minutes during night-time to rms and other emergencies. And our new voice-automated system lets customers handle routine requests witho ut ass istance 24 ho urs a day.

Through a new billing enhancement, our Utility field personnel are testing a new larges t customers now have the convenient mobile com/JUter system that schedules and option of receiving a single monthly bill that tracks their daily work activities . It cuts down summarizes energy consumption for all of their separately metered facilities. During 1996 we will expand the bill consolidation program to on time-consuming paper work and "talks "

with our customer information system to give our phone representatives up-to-the-minute e

include other customer groups. status re/J orts on service requests and repair work.

Increased competition means we can 't let our power lines be the only direct tie with our largest customers.

We're building bridges to our large business customers that pave the way for high-quality se rvice and strong-er customer partnerships. For instance, when Sony Music came to us with a request to build a new power line to serve its compact disc manufacturing plant, o ur account executive Nathan Berk saw a go lden opportunity to show a key customer the kind of top- notch service we deliver. "Sony's spec ificat ions challenged our project team to come up with some innovative engi neering and construction solutions,"

11 Berk explained. "We completed a major piece of the job during a single 24-hour period to minimize disrup-tions at the plant." Three AE crews worked around the clock to mee t the deadline and completed the job in time for Sony to begin its morning shift. "Executing jobs like this proves to our customers that we can bridge the gap between what they expect from a traditional electric utility, and what Atlantic Energy can deli ver to the co mpet iti ve marketplace."

O ur new environmental partnering program A late-summer drought led to severe ocean is helping business customers address and salt build-up on critical power lines serving solve complex regulatory issues. Our expert our seashore communities. To prevent costly assistance has proven to be of great value to equipment damage and keep our customers' customers that are expanding their facilities power on, we used truck- and helicopter-and are unsure of how to comply with New mounted power washers to remove salt from Jersey's environmental laws. more than 25 miles of line.

Atlantic Energy

The same power company that controls the spark is lighting your fire .

• Our new bulk power marketing team seeks out the mos t competitively priced power available in the market. During 1995 the

• N ew computerized equipment installed a t our Deepwater G enerating Station is making the job of unloading and handling coal more group nego tia ted power-related sales and purchases tha t saved us approximately

$5 .4 million in capacity and energy cos ts .

cos t-effective . A remote-controlled locomo-tive and a video sys tem that moni tors the coal as it's transferred to the boiler fuel system are e

saving the plant an es timated $ 200 ,000 each year in operations costs .

Atlantic Energy has broken out of the electri c-only business and is se lling natural gas services to commerc ial and industrial customers. In early 1995 we created Atlantic CN RG Services, LLC (ACNRG) , a joint venture with Minnesota-based orthern States Power. ACNRG hit the ground running and immed iately won a contract to suppl y natural gas to Atlantic ity's hotel-casino industry.

A RG' customer portfo lio has been growing at a steady pace, with 80% of its business now located outside southern New Jersey. "We're growing our customer base by targeting small to medium-sized businesses that don't have the internal resources needed to capture the significant sav ings ava ilable on the open gas market," said AC RG Executive Ron Scheirer. "In many cases we can save a customer who is still relying on their loca l distribution company as much as 30% on their natural gas bill." ACNRG is also a natural strategic fit with other Atlant ic Energy businesses like Atlantic Generation Inc. and ATS, that use large volumes of natural gas in their businesses. They can enj oy the competitive benefits of lower natural gas prices obta ined fo r them by A CN RG .

• One way we're making the rates we charge our customers more competitive is by renegotiating our coal supply contracts.

During 1995 we renegotiated our five

• We're trimming capital expenses and controlling our electric rates by increasing the efficiency of our power de livery system.

O ur new planning and operation strategy larges t coal-related contracts, saving us has increased the capacity of our existing and our customers approximately $3 .4 delivery sys tem by an average of I 0% and million on an annual basis. will save us an estimated $ I 6 million in capital cons truction expenditures over the next five years.

Atlantic Energy _ _ _ _ _ _--1

The same power company that keeps the cocoa flowing is making waves. *

• Our commercial sector turned in the strongest grow th trends in 1995, which is typically a sign of a strengthening economy.

• Our economic development incentive rate provides discounts to expanding or new commercial and industrial customers. The Close to 1,000 new commercial accounts were added to our sys tem .

45 businesses now on tha t rate account for

$6 .6 million in new annual electric revenue and have created more than 1,500 full-time e

jobs in South Jersey .

outh ern New Jersey's boat building industry does more than simply provide jobs. It's also a piece of o ur unique seasho re history. Boats have been built here for mo re than 300 yea rs, and some fa mily- run businesses have been in operatio n for gene ratio ns. So when a 10% federal luxury tax n earl y d rove the industry to ext inct io n, the community felt a great loss. In August 1993, the tax was repealed, and today the industry is back on an even keel. Companies like Viking Yachts have re hired mo re than 500 skilled workers to m ee t a re newed dema nd. Last yea r Viking built 7 5 luxury yac hts valued a t $50 millio n and expects to increase product io n by more than 25% in 1996. A tlanti c Energy is act ively involved in a public-private part-nersh ip that is fueling t he growth of ew Je rsey's boat building and marine industries. The partnership is deve lo ping natio nal and internati o nal m arketing strategies and wo rking to find new financing so lu -

tions fo r the industry. The gro up is also developing relationships with area school and colleges to secure a new ge n e rat io n of hi gh ly sk ill ed c raftspeop le .

• Atlantic City is experiencing a building boom, led by the construction of more than 3, 600 new casino hotel rooms. All signs indicate that the growth will continue, pro-

• An $8. 4 million expansion nears completion at the Atlantic City International Airport that will more than double the size of its terminal. The airport will also be the home of viding a significant boost to our projected Raytheon's new regional aircraft mainte-sales levels to the seas ide resort . nance facility. Raytheon's growth will be supported by our economic development discount rate.

Atlantic Energ)' - - - - - - - 1

The same power company that

• generates current is energizing the future.

O ne of our most critical objectives in 1995 was to find ways to cut the cost of operating Atlantic Electric's utility business. In 1995, we reduced core utility opera-tion and maintenance costs by over 4%. One way we did this was to create a new job category at our power plants that combines three previously separate jobs. The idea for an O&M Technician pos ition first surfaced as we were working with our union to find the most cost-effective way to run our new des ulfuriza tion

("scrubber") plant at B.L. England Station . By training one worker to operate and maintain the system, plus do electrical work, we found we could dramatically.

reduce plant down-time and ope rat ing costs. Also, since the O&M Techs have complete responsibility for all facets of plant operations, they're constantly looking fo r ways to improve processes and take full advantage of the new fle xibility they've ga ined in their jobs. The program has worked so well at the scrubber, it's been expanded to our large ge nerating stations.

In 1995 our power plant maintenance crews The new scrubber at B.L. England Station hit the road. They now move from plant to converts sulfur dioxide emissions into calcium plant, depending on where overhaul work is sulfate dihydrate, more commonly known as being done. This new fl.exib ility trims labor costs, reduces the need for contractors, and cuts costly plant down-time. T he mobile crews gypsum . During 1995, more than 48,000 tons of gypsum were produced by the scrub-ber. This valuable by-product is being sold e

are also creating a new source of revenue by to a New ]ersey wallboard maker, avoiding performing similar work for other businesses the cost and environmental impact of placing in the region. it in a landfill.

W e know we must continue to create new, and some-times radically different, ways to run o ur business if we are to be successfu l in the 21st century - the market-place will demand it! O ur vis ion is to become a grow ing, competitive company that delivers a steady stream of innovative energy solu tions to the marketplace. New energies are at work to make that transformati o n happen, and we're beg inning to see some prom ising resu lts. We're cutting costs, and with the help of our employee , finding creative ways to be more competi-tive in o ur core electric business. Thro ughout 1996 we wil l continue to make our power a better value for cus-17 tomers. The development of new products and services is another key prio ri ty in 1996. We have created a disci-plined process that helps us assess market opportuniti es and then align the internal resources needed to bring profitable product and service offers to our customers.

The idea is to become a key partner in o ur customers' lives and bu inesses, delivering more and mo re value to them and ultimate ly our shareholders. That's o ur charge for the future and that's where we'll be focu ing our energies.

Grants from Atlantic Energy, the US EPA , CoastalComm , Inc. has joined a venture that and others helped the Richard Stockton College is entering the /)ersonal communications of New Jersey install the state's largest photo- systems (PCS) market. PCS is considered voltaic system in a new academic building. The the next generation of wireless communication system converts solar energ)' into 18 kilowatts technology and offers users high-quality of power and will he//) us learn more about digital, voice and data transmission capabilities.

the business and environmental benefits of this technology.

Atlantic Energy

Atlantic Energy's Board of Directors Matthew Holden, Jr.

0 Mr. Hok/en, a director since 198 1, is the Henry L. and Grace M. Doheny Professor of Government and Foreign Affairs at the University of Virginia. He is a form er commissioner of the Federal Energy Regulatory Commission and the Wisconsin Public Service Commiss ion ,

and a fonner member of the President's Air Quality Advisory Board. He holds a doctorate in political science from No rthwestern University. Age: 64.

Professional Experience: regulatory affairs, energy consultation , arbitra-tion. Com mittee C hairman: Audit.

Committee Membership: Personnel &

Benefits; Wholesale .

• Gerald A. Hale Mr. Hale, a director since 1983, is president of Hale Resoiirces, Inc. , a health care, industrial/natural resource investment and management company.

H e is a director of New Jersey Manufacturers Insuran ce Compan y, New Jersey Business and Industry Association and Hoke, Inc. He is a grad-uate of Western Michigan Un iversit)'*

Age : 68. Professional Experience:

industrial minerals, chemicals and fabri-cated O.E.M. products . Committee Membershi/J: Personnel & Benefits; Retail. Chairman of Atlantic Energ)'

Enterprises, Inc .

• Jerrold L. Jacobs Mr. Jacobs is president and chief executive officer of the Company and chairman and chief executive offi cer of Atlantic City Electric Com/Jany. H e 0 Jos. Michael Galvin, Jr.

Mr. Galvin, a director since 1978, is president and chief executive officer of the Sou th Jersey Health Corporation - Th e Memorial Hospital of Salem County. He is a director of

• Richard B. McGlynn Mr. McGlynn, vice /JTes ident and ge neral counsel of U nited Water Resources, Inc. , has been a director since 1986. A practicing lawyer for has been with the Company for 34 Woodstown National Bank and the Center for over 30 years , he is a former commis-years. H e is a graduate of the Newark Health A ffairs. He is a graduate of the sioner of the New Jersey Board of Public College of Engineering (New Jerse)' Unive rsity of Scranton and holds a master's Utilities and a former judge. '*- Essex 1

Institute of Technology). Age: 56. Pro- degree in business adm inistra tion from Xavie r County, New Jersey. He is uate fessional Experience: utility operations. University. Age: 50. Professional Experience: of Rutgers Law School and - ' ceton Committee Membership: Ex-officio /J e r so nn e l , hea lth care mana ge ment. University. Age: 57. Professional Ex-member of all committees except Audit Committee Chairman: Personnel & Benefits. peri ence : law , utilit y regulation.

and Personnel & Benefits. Director of Committee Membership: Wholesale. Director Committee Membership: Finance & Public Atlantic Energy Enterprises, Inc. of Atlantic Energy Enterprises, Inc. Policy; Personnel & Benefits , Retail.

• Bernard ] . Morgan Mr. Morgan, a banking industry executive, was elected as a director in 1988. He holds a master's degree in business administration from the Wharton School of th e University of Pennsylvania. Age: 59. Profession-al Ex/Jerience: banking , finance.

Committee Chairman: Finance Public Polic)'. Committee Membership:

Audit. Director of Atlantic Energy Enterprises, Inc.

• Kathleen MacDonneLl M s. Mac Don nell was elected as a director in 1993. She is a corporate vice

/Jresident of Cam/Jbell Soup Company and president of its Frozen Foods Group. She is a member of the board of directors of the Campbell/Nakano Joint Venture, a member of the board of directors of the American Frozen Food Institute and a trustee of the Campbell Sou/J Com/Jany Foundation.

She is a gradiwte of the Un iversit)' of Massachusetts and holds a mas ter's degree in international management from the American Graduate School of International Management. Age: 47 Profess ional Experience: consumer

/Jroducts, marl<eting and international management. Committee C hairwoman:

Reta il. Committee Membership: Audit; Personnel & Benefits .

• Cyrus H . Holley Mr. Holley , a director since 1990, is president of Management Consulting Services. H e was formerly chief operat-ing officer, execu tive vice president and

• E. Douglas Huggard Mr. Huggard, a director since 1984 , is chainnan uf the board of the Compan)'* H e served as chairman and chief executive officer of the Company and Atlantic City Electric Harold J. Raveche Or. Raveche, who became a director in 1990, is president of the Stevens lnsritiae of Technology. He was formerly the dean of science of the Rensselaer Polytechnic a director of Engelhard Cor/Joration. Company from 1989 until 1993 , when he Institute. He is a director of National He is a graduate of Texas A&M retired after com/Jleting 38 years of service. Westminster Bancor/J, Inc., and a member iversity. Age: 59. Professional Prior to that , he was director, president and of the U.S. Council on Competitiveness

)erience : indus trial minerals, chief executive officer of the Company and and Business Executives for National

.. emicals and precious metals . Atlantic City Electric Com/Jany. H e holds a Security. He holds a doctorate in physical Co mmittee C hairman: Wholesale. master 's degree in mechanical engineering chemistry from the University of California.

Committee Membershi/J: Personnel & from the University of Delaware. Age: 62. Age: 52. Professional Experience: higher Benefits. Director of Atlantic Energy Professional Experience: utility operations. educarion, science and technology policy.

Enterprises , Inc. Committee Membership: Finance & Public Committee Membership: Audit; Finance Policy; Retail; Wholesale. & Public Policy; Retail , Wholesale.

Atlantic Energy _ _ _ __ _ _-1

A closer look at the companies of Atlantic Energy (A ll 1n fo rmari o n a; of 12/3 1/9 5)

Atlantic Electric Atlant ic El ectric, Atlantic Energy's primary subsidiary, is a regulated electric utility, servi ng more than 4 70,000 homes and businesses across southern New Jersey. With $2 .4 billi on in assets and

$9 54 million in annual revenue, Atlantic El ectri c is ac ti ve ly deve lop ing new energy- related product and ervices to ex pand its sources of reve nu e and become the energy prov ider of choice fo r its custome rs.

Atlantic Energy Enterprises, Inc. (AEE )

AEE was estab lished as a holding com-pany fo r Atl anti c Energy's non-regulated subs idiari es in January 1995. AEE has assets totaling $ 175 million and th ro ugh its vario us business entiti es expects to inve t an additional 400 milli on ove r the next fiv e yea rs. These companies will pursue growth opportunities in energy-related field s, particularly those that will leverage Atlantic Energy's ex ist ing busi-nesses and c ustomer re lati o nshi ps.

Table of Contents Report of Management and Ind ependent Auditors' Report --------.- Page 22 Condensed Consolidated Statement of Income ----------------------.- Page 23 Condensed Consolidated Balance Sheet -----------------------------.- Page 23 Condensed Consolidated Statement of Cash Flows ------------------.- Page 24 Consolidated Statement of Changes in Common Shareholders' Equity ---------* Page 25 Notes to Condensed Consolidated Financial Statements -------.- Page 26 Management's Discussion and Analysis of Financial Condition and Results of Operations ------- -- --* Pages 2 7-31 Financial and Statistical Review 1995-1985 --------------------.- Pages 32-33

• Investor Information -----------------------.- Page 34 Officers ---------------------------------.- Pages 35-36 We've carried our "shake-up" theme all the way into the financia l section of this report. The traditional 40-plus page document has been trimmed down to a 16-page summary. All the essential information is still here, presented in a more u er friendly form. For those of you who require the details, our full financial disclosure is included in the proxy statement for the 1996 annual meeting of shareho lders.

Atlantic Energy _ _ _ ___,

The management of Atlantic Energy, Inc. and its subsidiaries (the Company) is responsible for the financial statement and related information presented in this Summary Annual Report.

These statements and information are derived from the complete set of financial statements and related information contained in the 1995 Annual Report on Form 10-K and accompanying the 1996 proxy statement for the annual meeting of shareholders, both of which are filed with the Securities and Exchange Commission. Those financial statements are prepared in conformity with generally accepted accounting principles and have been audited by Deloitte &

Touche LLP, Certified Public Accountants. For more complete details regarding financial information on the Company, refer to the Form 10-K or the Proxy Statement.

J. L. Jacobs Pre ident and Chief Executive Officer

/i~_jJfJ~

M. J. Barron Vice President and Chief Financial Officer February 2, 1996 Independent

• Auditors' Report Deloitte &

Touche11P 0 Deloitte & Touche LLP consolidated financial statements are the responsibility of the Certified Public Accountants Company's management. Our responsibility is to expre an Two Hilton Court opinion on such conden ed consolidated financial statements Parsippany, New Jersey 07054 in relation to the complete consolidated financ ial statements.

In our opinion, the information set forth in the To the Shareholders and the Board of Directors of Atlantic accompanying condensed consolidated balance sheet as of Energy, Inc.:

December 31, 1995 and 1994 and the related condensed We have audited the consolidated balance sheets of Atlantic consolidated statements of income and cash flows and Energy, Inc. and its subsidiarie as of December 31, 1995 and changes in common shareholders' equity for each of the 1994, and the related consolidated statements of income, three years in the period ended December 31, 1995, i fairly changes in common shareholders' equity and cash flows for stated in all material respects in relation to the basic each of the three year in the period ended December 31, consolidated financial statements from which it .

1995. Such consolidated financial statements and our report been derived.

thereon dated February 2, 1996, expressing an unqualified opinion (which are not included herein) are included in Appendix A to the 1996 proxy statement for the annual ~.F~ LL /-'

meeting of shareholders. The accompanying condensed February 2, 1996

Condensed Consolidated Statement of Income e (Thousands of Dollars)

For the Years Ended December 31 ,

1995 1994 1993 Operating Revenues - Electric $953,137 $913,039 $865,675 Operating Expen es:

This expense includes ---* Energy and Purchased Capacity 382,336 341,820 270,219 the cost of fuel and 186,439 193,977 207,511 power purchased from Operations and Maintenance utility and nonutility Depreciation and Amortization 78,461 73,344 67,950 sources, including IPPs. Taxes 157,364 150,358 160,411 The increase in 1995's expense reflects the Total Operating Expenses 804,600 759,499 706,091 first time all 4 of ACE's IPP contracts Operating Income 148,537 153,540 159,584 were in fuU operation. r-.-

I I

Other Income and (Expense) - Net 9,058 (5,023) 12,688 I

I Interest Charges - Net 61,200 55,688 59,570 I

I Less Preferred Stock Dividend Requirements This is the net of in- .J of Subsidiary 14,627 16,716 17,405 come and expenses from a number of Net Income $ 81,768 $ 76,113 $ 95,297 diverse activities. The results of nonregulated Average Number of Shares of Common Stock bu.sinesses are reflected Outstanding (In Thousands) 52,815 54,149 52,888 here, and in 1994 this line-item included the Per Common Share:

cos t of ACE's down-sizing program. Earnings $ 1.55 $ 1.41 $ 1.80 Dividends Declared $ 1.54 $ 1.54 $ 1.535 Dividends Paid $ 1.54 $ 1.54 $ 1.53 December 31 ,

(Thousands of Dollars) 1995 1994 Assets Electric Utility Plant (Net of accumulated depreciation: $1,801,786 $1,781,923 1995 - $794,479; 1994 - $725,999)

Investments the com- ------ Total Investments and Nonutility Property 216,284 177,323 pany makes in its Total Current Assets 248,322 207,979 nonutility activities are accounted for Unrecovered Purchased Power Costs 99,817 115,538 here. Th e 14% in- ,. * .._ Recoverable Future Federal Income Taxes 85,858 85,854 crease over last year  : 64,274 73,834 primarily reflects [ Unrecovered State Excise Taxes investments made by  : Other Regulatory Assets 87,678 79,282 I

ATS for the Atlantic I I

Other Noncurrent Assets 16,877 23,822 City thermal energy I project. I I

Total Assets $ 2,620,896 $ 2,545,555 I

I Liabilities and Capitalization These regulawry assets -"

represent costs incurred Common Shareholders' Equity $ 813,177 $ 842,656 by ACE that under Preferred Stock of Atlantic City Electric Company 154,750 189,250 BPU regulation may 829,856 be collected from Long-Term Debt 778,288 customers in the Total Capitalization (excluding current portion) 1,797,783 1,810,194

,Ae. As they are Current Debt and Preferred Stock Maturities 118,042 21,850

' Wered these costs are recognized as an Other Current Liabilities 138,724 166,751 expense in the income Deferred Income Taxes and Investment Tax Credits 474,987 464,220 statement.

Other Noncurrent Credits 91,360 82,540 Total Liabilities and Capitalization $ 2,620,896 $ 2,545,555 Atlantic Energy

• I I

I (ThousanJs of Dollars)

For Years Ended December 31 ,

1995 1994 19-This statement re- Cash Flows of Operating Activities:

conciles the cash bal- Net Income $ 81,768 $ 76,113 $ 95,297 ance at the start of the Deferred Energy and Purchased Power Costs (4,714) 11 ,101 (21,319) year with the year-end cash balance. It also Depreciation and Amortization 78,461 73,344 67,950 shows how the com- Deferred Income Taxes - Net 25,946 17,863 20,901 pany generates and Unrecovered State Excise Taxes 9,560 (40,128) (33,706) uses cash, categorizing sources and disburse- Employee Separation Costs (19,112) 26,600 menis of cash into Other - Net (23,548) (7,213) 49,027 3 major activities -

operations, investment Net Cash Provided by Operating Activities 148,361 157,680 178,150 and financing.

Cash Flows of Investing Activities:

Utility Cash Construction Expenditures (100,904) (119,961) ( 138, 111)

This line includes energy costs that were Other - Net (39,466) (28,413) (26,202) deferred - or not recog-nized as an expense - in Net Cash Used by Investing Activities (140,370) (148,374) (164,313) our income statement Cash Flows of Financing Activitie :

to adjust for an underrecovery of fuel Debt Issued, Retired and Matured - Net 133,360 20,508 79,492 and energy costs from Stock Issued , Repurchased and Redeemed - Net (54,126) (18,120) 10,739 our customers. This Dividends Declared (95,715) (92,545) (84,664) expense is subtracted from net income here Other - Net 9,067 12,330 8,584 w account for the cash (7,414) (77,827) used to purchase the Net Cash (Used) Provided by Financing Activities 14,151 fuel and energy. Net lncrea e (Decrease) in Cash and Temporary Investments 577 (68,521) 27,988 Cash and Temporary Investments, beginning of year 5,114 73,635 45,6-Cash an~Temporary Investments, end of year $ 5,691 $ 5,114 $ 73,635

Consolidated Statement of Changes in Common Shareholders' Equity

- (Thousands of Do llar> )

Balance, December 31, 1992 Common Stock Issued Net Income Capital Stock Expense of Subsidiary Shares 52,198,624 1,308,162 Common Stock

$ 549,147 30,296 Retained Earnings

$ 242,768 95,297 (169)

Dividends Declared (81,347)

Balance, December 31, 1993 53,506,786 579,443 256,549 Common Stock Issued 870,159 17 ,941 Common Stock Repurchased (221,700) (3,909)

Net Income 76,113 Dividends Declared (83,481)

Balance, December 31, 1994 54,155,245 593,475 249,181 Common Stock I sued* 1,633 (413)

Common Stock Repurchased (1,625,000) (29,626)

Net Income 81,768 Dividends Declared (81,208)

Balance, December 31, 1995 52,531,878 $563,436 $249,741

• Included in Common Stock lsoued are amoun ts associated w1th adjustmen ts made for employee stock plan>.

Atlantic Energy _ _ _ _- 1

Notes to Condensed Consolidated Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES utilities based on a claim by the Ratepayer Advocate

• certain capacity costs are being recovered through b Atlantic Energy, Inc. (the Company, AEI or parent) is the base rates and LEC rates. The Ratepayer Advocate claims parent of Atlantic City Electric Company (ACE) and that the amount which ACE has overrecovered is $46 Atlantic Energy Enterprises, Inc. (AEE), which are wholly-million over the period June 1991 through May 1995.

owned subsidiaries.

ACE has filed rebuttal testimony and plans to litigate Principles of Consolidation - In the consolidated financial this matter fully.

statements presented for the Company and its subsidiaries, all significant intercompany accounts and transactions NOTE 3. COMMITMENTS AND CONTINGENCIES have been eliminated.

ACE has arrangements with various providers of bulk energy Regulation - The accounting policies and rates of ACE are to satisfy existing and future capacity and energy requirements.

ubject to the regulations of the New )er ey Board of Public Following is information regarding these arrangements Utilities (BPU) and in certain respects to the Federal relative to ACE.

Energy Regulatory Commission (FERC). ACE follows 1995 1994 1993 generally accepted accounting principles and financial reporting requirements employed by all industries as As a % of Capacity (year-end) 30% 29 % 23%

specified by the Financial Accounting Standards Board and As a % of Generation 52% 48% 46%

the Securities and Exchange Commission. However, Capacity Charges (millions) $190.6 $130.9 $110.8 Energy Charges (millions) $135.4 $128.6 $98.3 certain economic effects of the ratemaking process are permitted special accounting treatment regarding the timing and recognition of expenses and revenues. ACE owns 7.41 % of the Salem Nuclear Generating Station and 5% of the Hope Creek Station, both operated by Earnings Per Common Share - This is computed based Public Service Electric & Gas Company (PS). PS removed upon the weighted average number of common shares Salem Units 1 and 2 from service in May and June 1995, outstanding during the year.

respectively. Unit 2 is expected to return to service in NOTE 2. RATE MATTERS OF ACE the third quarter of 1996 after the equipment A management issues that have affected the operation h.

ACE has not filed for an increase in base rates since 1990, been resolved and corrected. Unit 1 is undergoing extended but recovers its fuel and energy costs through its Levelized testing of its steam generation equipment and its return has Energy Clause (LEC). Change in LEC rates are shown in been delayed for an indefinite period. ACE estimates that the table below. expenditures associated with restart activities in 1996 will approximate $5.6 million. Hope Creek was taken out of Changes in Levelized Energy Clause Rates ervice in November 1995 for a scheduled refueling outage 1993-1995 which has been extended to correct maintenance and Amount Amount performance problems. The Hope Creek unit is scheduled Date Requested Granted Date to return to service in March 1996. The incremental Filed (millions) (millions) Effective cost of replacement power during the outage is 3/93 $14.2 $10.9 10/93 approximately $1.8 million per month.

2/94 63.0 55.0 7/94 Recovery of replacement power costs are limited by a BPU-4/95 37.0 37.0 7/95 imposed nuclear performance penalty. Nuclear performance must attain a target capacity factor, with penalties or ACE's LEC is subject to annual review by the BPU and sets rewards above or below the band of reasonable June 1 through May 31 as the LEC period. performance. ACE expects to incur a penalty of $845 thousand, after tax, for 1995 performance.

In the 1994 and 1995 LEC filings, ACE initiated the Southern New Jersey Economic Initiative (SNJEI) which ACE has a trust to fund co ts of decommissioning each of forgoes the recovery of a portion of fuel and energy costs as the five nuclear units in which it has an ownership interest.

incurred. The SNJEI was de igned to keep ACE's rates The current annual funding is equal to the amount being competitive with neighboring utilities and has reduced the collected from customers through rates as authorized LEC recovery by $28 million in 1994 and $10 million in by the BPU. The funding amount is based on costs 1995. In the 1995 LEC filing, ACE deferred the recovery of estimated by the BPU for decommissioning activities, *

$20.6 million of costs incurred during the 1995/1996 LEC dates the decommi sioning activities are expected to be period to a future period. and the expected return on trust assets. In accordance with BPU requirements, updated site specific studies are In other rate proceedings, the BPU is investigating the underway. Amounts to be recognized and recovered in rates potential double recovery of capacity costs by New Jersey ba ed on the updated studies are not presently determinable.

Management's Discussion and Analysis of Financial Condition and Results of Operations

~ ANCIAL

SUMMARY

LIQUIDITY AND CAPITAL RESOURCES

~nsolidated operating revenues for 1995, 1994 and 1993 Atlantic Energy, Inc.

were $953.l million, $913.0 million and $865.7 million, The Company's cash flows are dependent on the cash flows respectively. The increase in 1995 revenue over 1994 largely of its subsidiaries, primarily ACE. Principal cash inflows of reflects a provisional increase in annual LEC revenues of the Company were as follows:

$37.0 million granted in July 1995 and an increase in unbilled revenues. The increase in 1994 revenue from 1993 (m1ll1o ns) 1995 1994 1993 wa primarily due to an increase of $55.0 million in LEC Dividends from ACE $81.2 $83.2 $81.3 revenues effective July 1994, accompanied by an increase in Credit Facility 34.5 sales of energy.

Dividend Reinvestment and Con olidated earnings per share for 1995 were $1.55 on net Stock Purchase Plan 6.7 16.2 income of$81.8 million, compared with $1.41 on net income of $76.l million in 1994 and $1.80 on net income of $95.3 AEI established a $75 million revolving credit and term loan million in 1993. The 1994 and 1993 earnings include facility to be used to fund further acqui itions of Company reductions of $.3 7 and $.10 for special charges, respectively. Common Stock and for other general corporate purposes. As Excluding the 1994 special charges, 1995 earnings per share of December 31, 1995, AEI had $34.5 million outstanding.

decreased from 1994 primarily due to reduced sales of energy.

Agreements between the Company and its subsidiaries Contributions to consolidated earnings per share were provide for allocation of tax liabilities and benefits as follows:

generated by the respective sub idiaries. A separate credit support agreement exists between the Company and ATE 1995 1994 1993 Investment, Inc. (ATE).

Utility $1.59 $1.41 $1.73 Nonutility (.04) .07 Principal cash outflows of the Company were as follows:

(Mil\1un; ) 1995 1994 1993 e quarterly dividend paid on Common Stock was $.385 Dividends to Shareholders $81.2 $83.2 $81.3

• share, or an annual rate of $1.54 per share. Information Advances and Capital with respect to Common Stock is as follows:

Contributions to Subsidiaries* (6. 7) 25.6 29.8 1995 1994 1993 Common Stock Reacquisitions 29.6 3.9 Loans to Subsidiaries 7.5 Dividend Paid Per Share $ 1.54 $ 1.54 $ 1.53

• N e t o( Repaymen t!;

Book Value Per Share $15.48 $15.56 $15.62 Annualized Dividend Yield 8.0% 8.7% 7.0% Current year Dividends Declared as presented on the Return on Average Consolidated Statement of Ca h Flows includes the effects Common Equity 9.9% 9.1% 11.7% of market purchases of Common Stock with reinvested Total Return (Dividends paid dividends as instituted since July 1994. Prior to this, funds plus change in share price) 18.0% (11.9)% 0.6% were available to the Company from the issuance of Market to Book Value 124% 113% 139% original shares.

Price/Earnings Ratio 12 13 12 Year-End Closing Price - NYSE $19.25 $17.63 $21.75 The Company has a program to reacquire up to three million shares of the Company's Common Stock. There is no schedule or specific share price target associated with the reacqui itions. At December 31, 1995, the Company had reacquired and cancelled 1,846, 700 shares.

Atlantic Energy _ _ _ _ __

Management's Discussion and Analysis of Financial Condition and Results of Operations Atlantic City Electric Company Cash construction expenditure for 1993-1995 were $359.0 million and included expenditures for upgrades to existing transmi sion and distribution facilities and compliance with provisions of the Clean Air Act Amendments (CAAA) of 1990. ACE's current estimate of cash construction expenditures for 1996-1998 is $255 million. These estimated expenditures reflect necessary improvements to generation, transmission and distribution facilities.

ACE also utilizes cash for mandatory redemption of Preferred Stock and maturities and redemption of long-term debt. Optional redemptions of securities are reviewed on an ongoing basis with a view toward reducing the overall cost of capital.

For 1993-1995, the redemption and maturity of ACE's securities were as follows:

(mtllions) 1995 1994 1993 Preferred Stock $24.5 $24.5 $ 5.3 First Mortgage Bonds 57.7 41.6 344.7 Scheduled debt maturities and sinking fund requirements aggregate $113.8 million for 1996-1998.

On or before April 1 of each year, ACE and other New Jersey utilities are required to pay excise taxes to the State of New Jersey. In March 1995, ACE paid $98.7 million, funded through the issuance of short-term debt. In 1994 and 1993, ACE paid an additional $50 million and $45 million, respectively, for the accelerated payment of one year's tax due as required by amended state law. These accelerated payments are being recovered through rates.

On an interim basis, ACE finances construction costs and other capital requirements in excess of internally generated funds through the issuance of unsecured short-term debt consisting of commercial paper and borrowings from banks.

A of December 31, 1995, ACE has arranged for lines of credit of $150 million of which $119.5 million was available. ACE's nuclear fuel requirements associated with it jointly-owned units have been financed through arrangements with a third party.

I Management's Discussion and Analysis of Financial Condition and Results of Operations ummary of the issue and sale of ACE's long-term RESULTS OF OPERATIONS

• t for 1993-1995 is as follows:

Operating results are primarily dependent upon the (millions) 1995 1994 1993 performance of ACE.

First Mortgage Bonds $ 22 Revenues Medium Term Notes $105 240 Pollution Control Bonds $ 55 4 Operating Revenues - Electric increased 4.4% and 5.5% in 1995 and 1994, respectively. Components of the overall changes are shown as follows:

The proceeds from these financings were used to refund higher-cost debt and for construction purposes. During (m1ll1ons) 1995 1994 1996-1998, ACE may issue up to $150 million in new $ 30.3 Levelized Energy Clause $ 49.2 long-term debt to be used for funding of construction (10.0) 9.6 Kilowatt-hour Sales and repayment of short-term debt. The provisions of (7.3)

Unbilled Revenues 16.6 ACE's charter, mortgage and debenture agreements can (11.9)

Sales for Resale 17.8 limit, in certain cases, the amount and type of (3.8) (3.0)

Other additional financing which may be used. At December 31, 1995, ACE estimates additional funding capacities Total $40.1 $ 47.4 of $288 million of First Mortgage Bonds, or $490 million of Preferred Stock, or $413 million of unsecured Billed Sales to Ultimate Utility Customers debt. These amounts are not necessarily additive. Change in kilowatt-hour sales are generally due to Atlantic Energy Enterprises, Inc. and Subsidiaries changes in the average number of customers and average customer use, which is affected by economic and weather Funds for investment in activities of AEE subsidiaries have conditions. Energy sales statistics, stated as percentage been obtained through capital contributions from AEI and changes from the previous year, are shown as follows:

borrowings under loan agreements with ATE and AEI. 1994 1995 Jliiii..E's business strategy reflects the potential investment of

. roximately $400 million over the next five years. Avg. Avg.# Avg. Avg.#

Customer Class Sales Use of Cust. Sales Use of Cust.

ATE provides funds management and financing to affiliates. Residential (2.0)% (3.1)% 1.2% 1.5% .4% 1.1 %

ATE obtained a portion of the funds for its business Commercial 1.4 (.1) 1.5 1.5 2.6 2.1 activities and loans through external borrowings. These Industrial (7.4) (9.0) 1.7 (2.9) (3.8) .9 borrowings include $15 million principal amount of 7.44%

Total (1.4) (2.6) 1.2 1.3 1.2 Senior Notes due 1999 and a $25 million revolving credit and term loan agreement. At December 31, 1995, $18.5 million were outstanding under the revolver. ATE had loans Costs and Expense outstanding with affiliates totaling $19 .4 million as of Total Operating Expenses increased 5.9% and 7.6% in 1995 December 31, 1995. ATE's cash flow are provided from and 1994, respectively. Included in these expenses are the lease rental receipts and realization of tax benefits costs of energy, purchased capacity, operations, maintenance, generated by its leveraged leases. depreciation and taxes. lncrea ed expenses are attributable to additional purchased capacity costs and, in 1994, the costs of increased generation. ACE's workforce reduction, which began in March 1995, resulted in savings of $8 million net of tax in 1995. The original estimate of $10 million savings was based on a full year's assessment.

Atlantic Energy _ _ _ _ __

Managetnent's Discussion and Analysis of Financial Condition and Results of Operations

• Long;rerm nonuciltry contracts.

Manage1nent's Discussion and Analysis of Financial Condition and Results of Operations

- look

~er the next five years, Atlantic Energy will devote In anticipation of heightened competition in energy markets, considerable resources to the development of energy- ACE is pursuing a number of initiatives designed to strengthen related businesses and markets. Atlantic Energy its position in the marketplace. The cost of ACE's power Enterprises' business plan calls for additional investments supp ly, including the cost of power purchased from of $400 million. AEE's investment strategy will further its independent power producers, along with its retail prices are long-term objectives of becoming a wholesale energy expected to be critical success factors in a competitive supplier and aggregator as well as a provider of energy marketplace. ACE is focusing on cost and rate control services while continuing to pursue strategic business measures as well as the development of new energy-related alliances and services for its customers. AEE also expects products and services. To allow for more flexibility and clo er to make additional investments in energy-related cost control, ACE transferred its production operations to its technologies and services that will support its growth and subsidiary, Deepwater Operating Company, in January, 1996.

financial performance. AEE's business plan indicates a Alternate pricing mechanisms and long-term discount power positive contribution to earnings in 1996. contracts are being exp lored as means of retaining key customers that are at risk of leaving ACE's system. While any Throughout this period, however, ACE's utility business such discounts are intended to have a long-term beneficial will continue to be the primary factor influencing impact, they could have a detrimental effect on ACE's the Company's overall financial performance. Factors operating revenues and net income in the short term.

such a regional economic trends, abnormal weather conditions and inflation will continue to be important The electric utility industry continues to be capital inten ive.

determinants of ACE's financial performance. However, ACE has lowered its planned construction budget to $398 continued competition from independent power producers million for 1996-2000, with an expected reduction in its and anticipated deregulation of the electric utility industry external cash requirements. ACE's ability to generate cash are becoming the most critical strategic factors for ACE. flows or access the capital markets to fund capital requirements will be affected by competitive pressures on Fundamental changes in the industry have led to the revenues and net income as well as regulatory initiatives and rgence of significant competitive issues for ACE, rate developments.

• uding heightened competition in the wholesale bulk power market, the growth of the independent ACE's net income and the level of its LEC rates may be power industry and the pre sure to offer more affected by the operational performance of nuclear competitive rates to customers. generating facilities and a BPU-mandated nuclear unit performance standard. Net income may also be affected by ACE is closely monitoring deregulation of the industry on significant changes in the decommissioning costs both a state and federal level. FERC's ongoing rulemaking associated with the nuclear units. At this time, it is not proceeding is proposing changes to rules governing known what impact there may be on future operations transmission access and pricing. FERC is also establishing and financial condition associated with the uncertain guide lines for recovery of tranded costs and investments status of Salem Station Unit 1.

stemming from wholesale transactions. In response to FERC's initiative, the power pool in which ACE participates has proposed significant changes to its structure and operation.

State jurisdictions across the country, including New Jersey, are closely examining the issues surrounding deregulation or are creating new regulations designed to foster a more competitive industry. ACE is playing an act ive role in the BPU's ongoing Energy Master Plan proceeding. Among other things, the proceeding is investigating the extent to which utilities, in a competitive environment, may be threatened with the inability to recover investments or long-term commitments prudently made and placed into rates under traditional ratemaking a ulations. To date, the BPU has made no formal policy

- nouncement regarding deregulation or the recovery of stranded commitments.

Atlantic Energy _ _ _ _ _---1

Financial &Statistical Review 1995--1985 1995 1994 1993 Atlantic Energy, Inc. - Investor Information Operating Revenues (000) $ 953,137 $ 913,039 $ 865,675 $ 816,825 Net Income (000) $ 81,768 $ 76,113 * $ 95,297 $ 86,210 Average Number of Common Shares Outstanding (000) 52,815 54,149 52,888 51,592 Earnings per Average Common Share $ 1.55 $ 1.41 * $ 1.80 $ 1.67 Total Assets (Year-end) (000) $ 2,620,896 $ 2,545,555 $ 2,487,508 $ 2,219,338 Long-Term Debt and Cumulative Preferred Stock Subject to Mandatory Redemption (Year-end) (000) $ 1,019,603 $ 940,788 $ 952,101 $ 842,236 Capital Lease Obligations (Year-end) (000) $ 40,886 $ 42,030 $ 45,268 $ 49,303 Dividends Declared on Common Stock $ 1.54 $ 1.54 $ 1.535 $ 1.515 Dividend Payout Ratio 99% 109 % 85 % 90 %

Book Value per Share (Year-end) $ 15.48 $ 15.56 $ 15.62 $ 15.17 Price/Earnings Ratio (Year-end) 12 13 12 14 Times Fixed Charges Earned (pre-tax, Atlantic Electric) 3.34 3.21 3.54 3.76 Common Shareholders (Year-end) 48,683 48,850 47,832 46,524 Atlantic City Electric Company (Principal Subsidiary)

Employees (Year-end) 1,455 1,794 1,835 2,023 Facilities for Service Total Utility Plant (000) $ 2,596,265 $ 2,507,922 $ 2,402,415 $ 2,279,107 Additions to Utility Plant (000) $ 103,399 $ 126,367 $ 141,927 $ 134,326 Generating Capacity (Kilowatts) (Year-end) (a) (b) 2,351,700 2,327,700 2,307,700 2,160,700 Maximum Utility System Demand (Kilowatts) 2,042,000 1,834,000 1,962,000 1,796,000 Capacity Reserve at Time of Peak

(% of Installed Generation) 12.8 % 19.4 % 11.2 % 16.9 %

Energy Supply (mwh):

Net Generation 5,698,996 A

6,081,778 6,025,861 Purchased and Interchanged 4,723,701 4,439,228 3,753,433 Total System Load 10,422,697 10,521,006 9,779,294 Electric Sales to Ultimate Customers (mwh):

Residential 3,476,540 3,546,789 3,495,722 3,276,330 Commercial 3,391,319 3,344,675 3,259,541 3,100,133 Industrial 1,133,788 1,224,721 1,261,069 1,229,211 All Others 51,218 51,671 50,080 49,464 Total (c) 8,052,865 8,167,856 8,066,412 7,655,138 Residential Electric Service (Average per Customer)

Amount of Electricity Used During the Year (kwh) 8,368 8,638 8,608 8,131 Revenue for a Year's Service $ 1,037.88 $ 1,003.30 $ 969.86 $ 903.91 Revenue per Kilowatt-hour 12.40 ¢ 11.62 ¢ 11.27 ¢ 11.12 ¢ Ultimate Customer Data (Average Customers)

Residential With Electric Heating 82,759 82,612 82,385 82,206 Residential Without Electric Heating 332,695 327,985 323,722 320,744 Total Residential 415,454 410,597 406,107 402,950 Commercial 54,883 54,094 52,988 51,996 Industrial 997 980 971 990 All Others 517 518 522 524 Total Ultimate Customers (c) 471,851 466,189 460,588 456,460 Operating Revenues (000)

Electric Service:

Re idential $ 431,206 $ 411,954 $ 393,866 $ 364,232 Commercial 352,432 332,145 315,089 299,866 Industrial 99,074 101,093 100,812 97,475 All Others 11,163 10,905 10,575 8 Total from Electric Service 893,875 856,097 820,342 Unbilled Revenues - Net 9,445 (7,239) 28 Sales for Resale 42,438 54,370 36,576 Other Electric Revenues 8,021 9,998 8,853 Total Operating Revenues (c) $ 953,779 $ 913,226 $ 865,799 $ 816,931 Reflect-; special charge!!, pri marily for employee separation costs. (a) Excludes capactty allocated to a Luge industri al cuscomer prio r co 1994.

(b ) lncluJ es unit purchase~ and !i.1le!i of capacity under contracts wi th certain other uti li ties and no nun hu es. (c) Includes 'ale:-. to an affiliate with in che Atlantic Energy consoltdaced group.

1990 1989 1988 1987 1986 1985

$ 808 374 $ 740 894 $ 723 216 $ 687 335 $ 635 ' 657 $ 604 716 $ 612,035 85,635 $ 68,879' $ '

80,964 $ '

72,171 $ 73,765 $ '

54,946 $ 46,150 49,008 45,590 43,268 39,186 36,622 36,532 36,138

$ 1.75 $ 1.51 $ 1.87 $ 1.84 $ 2.01 $ 1.50 $ 1.28

$ 2,151,416 $ 2,006,010 $ 1,864,461 $ 1,660,286 $ 1,499,381 $ 1,401,064 $1,319,027

$ 807,347 $ 747,877 $ 725,329 $ 594,461 $ 522,815 $ 534,822 $ 521,612

$ 53,093 $ 57,971 $ 33,146 $ 32,880 $ 37,694 $ 37,603 $ 38,857

$ 1.495 $ 1.4 7 $ 1.425 $ 1.37 $ 1.3575 $ 1.305 $ 1.2775 85 % 97 % 75 % 75 % 66% 87 % 99 %

$ 14.84 $ 14.36 $ 14.27 $ 13.58 $ 12.86 $ 12.18 $ 11.98 12 11 10 9 8 12 11 3.68 2.94 3.19 3.06 3.68 2.99 3.06 43 802 42 295 43 383 44 473 45 586 47 133 48 635 2,032 2,055 2,021 2,092 2,148 2,168 2,099

$ 2,175,601 $ 2,027,138 $ 1,846,122 $ 1,712,614 $ 1,602,801 $ 1,503,010 $1,438,643

$ 177,298 $ 170,772 $ 147,886 $ 130,281 $ 105,521 $ 109,303 $ 105,213 2,090,700 1,959,700 1,879,700 1,807,700 1,660,700 1,660,700 1,605,700 1,911,000 1,741,000 1,700,000 1,636,000 1,609,000 1,459,000 1,432,000 5.2 % 10.9 % 9.6 % 9.5 % 3.1 % 12.1 % 10.8 %

6,300,891 6,267,559 6,260,942 5,863,119 6,157,938 5,966,600 5,817,254

_3* .024 2,606,067 2,597,623 2,567,871 1,773,837 1,454,491 1,333,174

,915 8,873,626 8,858,565 8,430,990 7,931,775 7,421,091 7,150,428 3,370,327 3,267,606 3,265,918 3,213,010 3,040,410 2,839,114 2,638,121

(

3,147,318 3,063,069 2,917,162 2,741,976 2,592,232 2,401, 199 2,298,895 1,368,329 1,376,423 1,380,832 1,339,005 1,323,567 1,222,981 1,204,971 49,626 49,769 53,872 56,289 58,191 58,120 57,685 7,935,600 7,756,867 7,617,784 7,350,280 7,014,400 6,521,414 6,199,672 8,440 8,251 8,382 8,460 8,281 7,982 7,643

$ 906.66 $ 844.37 $ 840.34 $ 838.70 $ 808.14 $ 791.09 $ 799.29 10.74 ¢ 10.23 ¢ 10.03 ¢ 9.91 ¢ 9.76 ¢ 9.91 ¢ 10.46 ¢ 81,838 81,479 80,409 78,805 75,900 72,640 68,871 317,486 314,529 309,245 300,974 291,253 283,062 276,305 399,324 396,008 389,654 379,779 367,153 355,702 345,176 51,077 50,274 49,509 48,398 46,775 45,359 44,256 998 1,002 1,008 1,014 1,015 1,022 1,020 524 537 549 552 554 554 554 451,923 447,821 440,720 429,743 415,497 402,637 391,006

$ 362,050 $ 334,375 $ 327,443 $ 318,520 $ 296,712 $ 281,393 $ 275,897 292,349 271,688 256,199 240,890 222,129 214,230 216,052 102,202 96,766 94,634 91,661 84,476 80,037 83,628

,136 9,668 9,901 9,935 10, 199 10,230 10,470

_j 766,737 712,497 688,177 661,006 613,516 585,890 586,047 3,229 (4,055) 7,215 6,716 385 (1,813) 3,076 1~:~~~ l~:~~~ 1~:~~~

30,404 24,115 11,476 12,840 8,112 8,448 8,137 8,916

$ 808,482 $ 741,005 $ 723,353 $ 687,335 $ 635,657 $ 604,716 $ 612,035

=========================================="=================================== Atlantic Energy

Investor Information (As of December 31 , 1995)

Where should I send inquiries concerning my investment their tax advisors with regard to personal prop .

in Atlantic Energy or Atlantic Electric? tax liability.

The company serves as recordkeeping agent, dividend disbursing agent and also as transfer agent for common stock Who is the trustee and interest paying agent for Atlantic and Atlantic Electric's preferred stock. Correspondence Electric's bonds and debentures?

concerning such matters as the replacement of dividend First mortgage bond recordkeeping and intere t disbursing checks or stock certificates, address changes, dividend are performed by The Bank of New York, 101 Barclay Street, reinvestment and stock purchase plan inquiries or any New York, New York 10286. Debenture recordkeeping and general information about the company should be interest disbursing are performed by First Fidelity Bank, addressed to: N.A., 765 Broad Street, Newark, New Jersey 07102.

Atlantic Energy, Inc.

Investor Records Does the company have a Dividend Reinvestment and 6801 Black Horse Pike Stock Purchase Plan ("Plan")?

P.O. Box 1334 Yes. The Plan allows shareholders of record and interested Pleasantville, New Jersey 08232 investors to automatically invest their cash dividend and/or Telephone (609) 645-4506 or (609) 645-4507 optional cash payments in hares of the company's common Effective February 1, 1996, the role of transfer agent for stock. Other services available to Plan participants include certificate safekeeping and automatic investment. Holders of common stock will be shared with Continental Stock Transfer & Trust Company. Requests for the transfer of record of common stock or interested investors wishing to enroll in the Plan should contact Investor Record at the common stock certificates should be forwarded to:

address listed. In addition, shareholders whose stock is held in Continental Stock Transfer & Trust Company a brokerage account may be able to participate in the Plan.

2 Broadway, 19th Floor These shareholders should contact their broker or Investor New York, NY 10004 Records for more information.

Telephone (212) 509-4000 Preferred stockholders should continue to contact Atlantic Where is the company's stock listed?

Energy with regard to the transfer of their stock. Common stock is listed on the New York Stock Exchange.

The trading symbol of the company's common stock When are dividends paid? is ATE; however, newspaper listings generally use The proposed record date and payable dates are as follows: AtlEnrg or AtlanEngy.

Record Dates Payable Dates The high and low sale prices of the common stock reported in the Wall Street Journal as New York Stock March 25, 1996 April 15, 1996 Exchange-Composite Transactions for the periods June 24, 1996 July 15, 1996 indicated were as follows:

September 23, 1996 October 15, 1996 December 23, 1996 January 15, 1997 1995 1994 High Low High Low The following table indicates dividends paid per share in 1995 and 1994 on common stock: First Quarter $19.000 $17.750 $21.750 $19.875 Second Quarter 19.625 17.875 21.500 16.375 1995 1994 Third Quarter 19.875 18.125 19.625 16.125 First Quarter $ .385 $ .385 Fourth Quarter 20.125 19.000 18.250 16.000 Second Quarter .385 .385 Third Quarter .385 .385 Is additional information about the company available?

Fourth Quarter .385 .385 A full set of financial statements is included in Atlantic Annual Total $1.54 $1.54 Energy's 1996 Proxy Statement. The annual report to the Securities and Exchange Commission on Form 10-K and Dividend checks are mailed to reach shareholders other reports containing financial data are available to approximately on the payment date. If a dividend check is shareholders. Specific requests should be addressed .

not received within 10 days of the payment date, or if one is lost or stolen, contact Investor Records. Atlantic Electric Financial Services Department Dividends paid on common stock in 1995 and 1994 were 6801 Black Horse Pike fully taxable. Some state and local governments may impose Egg Harbor Township, New Jer ey 08234-4130 personal property taxes on shares held in certain corporations. Telephone (609) 645-4483 or (609) 645-4150 Shareholders residing in those states should consult FAX ( 609) 645-4132

Officers Of Atlantic Energy, Inc. and Subsidiaries

. /Year> of Service) As of December 31, 1995

. rold L. Jacobs (56/34) Henry K. Levari, Jr. (4 7/24)

President and Chief Executive Officer of Atlantic Energy Vice President of Atlantic Energy Director of Atlantic Energy, Atlantic Electric and Director of Atlantic Electric Atlantic Energy Enterprises Senior Vice President-External Affairs of Atlantic Electric Chairman and Chief Executive Officer of Atlantic Electric Mr. Levari has served as vice president of Atlantic Energy Mr. Jacobs was elected president & chief executive officer and senior vice president of Atlantic Electric since 1991.

of Atlantic Energy in 1993 and has also held the position Mr. Levari was named senior vice president-external affairs of chairman & chief executive officer of Atlantic Electric in 1995. Prior to his current position he served as senior since 1993. He has also held the positions of president, vice president-customer operations. He joined Atlantic chief operating officer and executive vice president of Electric in 1971 as an engineer.

Atlantic Electric. Mr. Jacobs joined Atlantic Electric in 1961 as an engineer. Marilyn T. Powell (48/2)

Vice President of Atlantic Energy Michael J. Chesser (4 7/2) Senior Vice President-Marketing of Atlantic Electric Senior Vice President of Atlantic Energy Mrs. Powell was elected to her current po ition in 1995.

President and Chief Operating Officer of Atlantic Electric She joined Atlantic Electric in 1994 as vice president-Director of Atlantic Electric and Atlantic Energy Enterprises marketing. She previously erved as IBM's director of Mr. Cheser was elected to his current position in 1995. marketing process for its U.S . unit.

He joined Atlantic Energy in 1994 as vice president as well as executive vice president and chief operating officer Scott B. Ungerer (36/14) of Atlantic Electric. Prior to joining Atlantic Energy, he Vice President of Atlantic Energy was an executive with Baltimore Gas & Electric, where he Director of Atlantic Energy Enterprises (AEE) served as vice president-marketing & gas operations. and all AEE subsidiaries President and Chief Operating Officer

. chael J. Barron (46/1) of Atlantic Energy Enterprises Vice President and Chief Financial Officer of Atlantic Energy President of ATE Investment, Atlantic Energy Technology, Senior Vice President and Chief Financial Officer of Atlantic Southern Properties and Coa talComm Atlantic Electric Member of the operating committee for Atlantic CNRG Services, LLC Mr. Barron joined Atlantic Energy in 1995. He previously served as vice president and treasurer of Maxus Energy Mr. Ungerer was named vice president of Atlantic Energy Corporation, Dallas, Texas. in 1994, and president and chief operating officer of Atlantic Energy Enterprises in 1995. He previously served James E. Franklin II (49/2) in various executive positions in Atlantic Energy's Vice President, Secretary and General Counsel nonutility companies and held various management of Atlantic Energy positions at Atlantic Electric. He joined Atlantic Electric Secretary of Atlantic Energy Enterprises in 1980 as an engineer.

Director, Senior Vice President, Secretary and General Counsel of Atlantic Electric Louis M. Walters (43/17)

Treasurer of Atlantic Energy Mr. Franklin joined Atlantic Energy in 1994 as general Vice President, Treasurer and Assistant Secretary counsel and was named to his current positions in 1995. He of Atlantic Electric was previously a senior partner with the law firm of Megargee, Certified Public Accountant Youngblood, Franklin & Corcoran, P.A. where he represented Atlantic Energy in the capacity of external legal counsel. Mr. Walters was named to his current position in 1995. He has served as vice president-treasurer of Atlantic Electric Meredith I. Harlacher, Jr. (53/30) since 1993. He previously served as general manager-Vice President of Atlantic Energy treasury and finance of Atlantic Electric. He joined Director of Atlantic Electric Atlantic Electric in 1978 as an accountant.

...lt.nior Vice Pre ident-Power System of Atlantic Electric

• . Harlacher has served as vice president of Atlantic Energy and senior vice president of Atlantic Electric since 1987. He was named senior vice president-power system in 1995. He most recently served as senior vice president-energy supply. He joined Atlantic Electric in 1965 as an engineer.

Atlantic Energy _ _ _ _ _--1

Officers Of Atlantic Energy, Inc. and Subsidiaries (continued)

(Age{Years of Service) As of December 31 , 1995 Frank E. DiCola ( 48/2)

Vice President and Treasurer of Atlantic Energy Enterprises (AEE)

Director of all AEE subsidiaries President of Atlantic Thermal Systems Treasurer of ATE Investment, Atlantic Energy Technology, Atlantic Generation, Atlantic Southern Properties and CoastalComm Member of the operating committee for Atlantic CNRG Services, LLC Secretary of Atlantic Generation Mr. DiCola was named to his position in 1995. He joined Atlantic Thermal Systems as president in 1994. He was previously with Cogeneration Partners of America where he served as president.

Ernest L. Jolly (43/15)

Vice President-Atlantic Transformation of Atlantic Electric Mr. Jolly was elected vice president of Atlantic Electric in 1992 and was named to his current position in 1994. He previously served as vice president-external affairs. He joined Atlantic Electric in 1980 as an engineer.

J. David McCann (44/23)

Vice President-Strategic Cu tomer Support of Atlantic Electric Mr. McCann was named to his current position in 1994. He ha served as a vice president of Atlantic Electric since 1985.

Prior to his current assignment, he served as vice president-engineering & construction service of Atlantic Electric. He joined Atlantic Electric in 1972 as an engineer.

Henry C. Schwemm, Jr. (54/26)

Vice President-Power Generation & Fuels Management of Atlantic Electric Mr. Schwemm was named to his current position in 1993.

He previously served as vice president-production of Atlantic Electric. He joined Atlantic Electric in 1969 a an engineer.

James C. Weller (46/2)

Vice President and Assistant Secretary of Atlantic Energy Enterprises (AEE) and Director of all AEE subsidiaries President of Atlantic Generation ecretary of ATE Investment, Atlantic Energy Technology, Atlantic Southern Properties, Atlantic Thermal Systems and CoastalComm Treasurer of Atlantic Thermal Systems Mr. Weller was named to his current position in 1995. He joined Atlantic Generation, Inc. as president in 1994. He previously held the position of vice president-engineering and project development for Cogeneration Partners of America.

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1'11 Ll"ln I II..

ENERCY 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130