Atlantic Energy/Delmarva Power & Light (A) Case Solution
Delmarva Power & Light and Atlantic Energy are neighboring electric utilities, which is located in NJ and Delaware.On the beginning of 1996, they entered into merger discussions, but were unable to reach an agreement on price because they couldn't agree on what impact deregulation would have on Atlantic.
In the now controlled electricity marketplace, Atlantic was prosperous even though it was one of the high-cost power companies within the territory.However, in such a decentralized atmosphere, where the set prices would definitely fall, Atlantic might become unprofitable and, thus, worth. The essential problems are to determine how much to pay for Atlantic and how to structure a deal which will bridge the disagreements over value. Unlike specific scenarios where hedging can resolve doubt, there is no means to hedge the rate of deregulation or the magnitude of cost declines due to competition.
PUBLICATION DATE: February 13, 1998
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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