Filed by Energy East Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: RGS Energy Group, Inc.
Registration No. 333-59300
1ST QUARTER REPORT | 2001
[GRAPHIC DEPICTING A STADIUM UNDER CONSTRUCTION]
GROWTH
------
Upon completion of the RGS Energy merger we will be one of the
most diversified energy providers in the Northeast, serving nearly 3 million
customers, with annual revenues of approximately $5 billion and nearly $10
billion in assets.
[ENERGY EAST LOGO]
Fellow Shareholders:
STRONG EARNINGS REFLECTS CONTRIBUTIONS FROM NEW COMPANIES
Earnings for the quarter ended March 31, 2001, increased 15 cents per share
primarily due to earnings from the mergers we completed last year, higher
retail electricity and natural gas deliveries and our share repurchase
program. Those increases were partially offset by higher costs of energy and
lower retail electricity prices. Due to the seasonal nature of the merged
companies' businesses, earnings for 2001 are expected to be stronger in the
first and fourth quarters and weaker in the second and third, as compared to
last year.
FINANCIAL HIGHLIGHTS (unaudited)
3 Months Ended March 31
2001 2000
(Thousands, except per share amounts)
--------------------------------------------------------------------
Operating Revenues
Sales and services $1,271,139 $684,426
--------------------------------------------------------------------
Operating income $262,528 $169,327
--------------------------------------------------------------------
Income taxes $89,578 $55,085
--------------------------------------------------------------------
Net income $115,601 $93,327
--------------------------------------------------------------------
Average shares outstanding 117,386 112,777
--------------------------------------------------------------------
Earnings per share basic and diluted $.98 $.83
--------------------------------------------------------------------
Dividends per share $.23 $.22
--------------------------------------------------------------------
Earnings per share increased 18 cents for the 12 months ended March 31,
2001, excluding non-recurring items in 2000 and 1999 and the extraordinary
losses form the early retirement of debt. The increase was primarily due to
higher retail electricity and natural gas deliveries, share repurchases,
earnings from the merged companies and cost control efforts. Those increases
were partially offset by higher costs of energy and lower retail electricity
prices.
CREATING A LEADING NORTHEAST ENERGY COMPANY
In February we signed a merger agreement with RGS Energy Group, Inc. RGS
Energy is the holding company for Rochester Gas & Electric, which provides
electricity and natural gas to over 600,000 customers within a 2,700
square-mile service territory centered around the city of Rochester, NY.
This merger is another important milestone in becoming a super-regional
energy delivery and services company. By combining with RGS Energy, we
become the premier upstate New York energy utility, while also strengthening
our overall presence in the Northeast, adding to our generation portfolio and
providing the opportunity for enhanced returns to shareholders.
We anticipate that all necessary regulatory approvals will be obtained
by the first quarter of 2002. We will continue to keep you informed as this
merger progresses.
NYSEG PROPOSES FREEZING ELECTRIC RATES
NYSEG, our upstate New York subsidiary, has proposed a seven-year Price
Protection Plan for its electric consumers designed to protect them from the
significant electric supply price spikes and volatility that is impacting
consumers in New York City and across the United States. By assuring
long-term, reliable energy supply at stable prices, NYSEG's plan is designed
to achieve a sensible transition to a competitive energy marketplace in
upstate New York. In addition, by promoting competition through customer
choice, NYSEG's plan assures that the people and businesses of upstate New
York ultimately receive the benefits intended by deregulation of the electric
industry. Implementation of the plan is subject to approval by the Public
Service Commission. This plan is part of a comprehensive, six-point energy
policy proposed by NYSEG for upstate New York to support an orderly
transition to a competitive energy marketplace.
ENERGY DELIVERIES
3 Months Ended March 31
2001 2000
ELECTRIC
--------------------------------------------------------------------
Thousands of megawatt hours
Residential 2,514 1,519
Commercial 1,633 838
Industrial 1,616 812
Other 441 392
--------------------------------------------------------------------
Total Retail 6,204 3,561
Wholesale 1,662 1,842
--------------------------------------------------------------------
Total 7,866 5,403
--------------------------------------------------------------------
NATURAL GAS
--------------------------------------------------------------------
Thousands of dekatherms
Residential 26,424 14,690
Commercial 10,752 5,136
Industrial 1,177 926
Other 3,253 2,087
Transportation of customer-owned gas 13,890 11,654
--------------------------------------------------------------------
Total Retail 55,496 34,493
Wholesale 3,375 2,618
--------------------------------------------------------------------
Total 58,871 37,111
--------------------------------------------------------------------
I look forward to updating you on our progress on these and other
initiatives as we continue to implement our strategy.
/s/ Wes von Schack
Wesley W. von Schack
Chairman, President and Chief Executive Officer
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The foregoing contains forward-looking statements within the meaning of the
"safe harbor" provisions of the United States Private Securities Litigation
Reform Act of 1995. Investors are cautioned that such forward-looking
statements with respect to revenues, earnings, performance, strategies,
prospects and other aspects of the business of Energy East and RGS Energy are
based on current expectations that are subject to risks and uncertainties. A
number of factors could cause actual results or outcomes to differ materially
from those indicated by such forward-looking statements. These factors
include, but are not limited to, risks and uncertainties set forth in Energy
East's and RGS Energy's filings with the SEC, including risks and
uncertainties relating to: failure to obtain and retain expected synergies
from the merger between Energy East and RGS Energy and the prior Energy East
mergers, delays in obtaining or adverse conditions contained in any required
regulatory approvals, changes in laws or regulations, economic or weather
conditions affecting future sales and margins, changes in markets for
electricity and natural gas, availability and pricing of fuel and other
energy commodities, legislative and regulatory changes (including revised
environmental and safety requirements), availability and cost of capital and
other factors. Readers are referred to Energy East's and RGS Energy's most
recent reports filed with the SEC.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with their proposed merger, Energy East and RGS Energy have
filed a joint proxy statement/prospectus with the Securities and Exchange
Commission. The joint proxy statement/prospectus was mailed to Energy East
and RGS Energy shareholders beginning on April 28, 2001. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS,
BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors and security holders
may obtain a free copy of the joint proxy statement/prospectus and other
documents filed by Energy East and RGS Energy with the Commission at the
Commission's web site at http://www.sec.gov. Free copies of the joint proxy
statement/prospectus, and each company's other filings with the Commission
may also be obtained from the respective companies. Free copies of Energy
East's filings may be obtained by directing a request to Energy East
Corporation, P.O. Box 3200, Ithaca, NY 14852-3200, Telephone: (800)
225-5643. Free copies of RGS Energy's filings may be obtained by directing a
request to RGS Energy Group, Inc., 89 East Avenue, Rochester, NY 14649,
Telephone: (800) 724-8833.