Exelon CEO: 'We are not asking the state for a bailout'Apr 30 - McClatchy-Tribune Regional News - Julie Wernau Chicago Tribune
Exelon Corp. is not seeking a bailout from Illinois to prop up its ailing nuclear power plants, Christopher Crane, chief executive of the energy company, said Wednesday in an exclusive interview with the Tribune. "We are not -- are not -- asking the state for a bailout," Crane said. "We are looking at different ways to contract/ sell energy from those plants into other markets, into other buyers, but there is not a state bailout." Chicago-based Exelon's nuclear power plants have been hurt by competition from power generated by wind turbines and natural gas. Exelon on Wednesday also reported first quarter earnings of $90 million, or 10 cents a share, in contrast with a loss of $4 million loss, or a penny a share, in the year-ago period. Revenue rose to $7.2 billion, up from $6.1 billion. Crane's comments came after Exelon also announced an agreement to acquire Washington, D.C.-based Pepco Holdings Inc., a utility, for $6.8 billion, a transaction that would help Exelon expand its base in the regulated energy business from selling power on the open market. Once the Pepco transaction is completed next year about 65 percent of Exelon's earnings would come from its regulated utilities. The largest owner of nuclear power in the nation, Exelon has been leaning more heavily on its regulated utilities in recent years. With depressed power prices and increasing competition from wind and natural gas, the company's nuclear plants haven't been rolling in the profits they once did for Exelon and the company has threatened plant closures if conditions don't improve. That led to rumors at the Illinois statehouse that the company was looking for a legislative fix to prop up its nuclear plants. Springfield insiders had said a deal to fix the state's broken renewable portfolio standard was being held up until it was clear what kind of handout the company was seeking. The state hasn't bought any solar power for Illinois consumers over the last two years -- and officials say that if a glitch in the so-called renewable portfolio standard isn't soon fixed, 2015 will be yet another dark year for solar power. Exelon's support is key to the fix moving forward. In the Tribune interview before the conference call, Crane also said the company does not support a 500-mile high voltage transmission line Clean Line Energy project that is pending approval at the Illinois Commerce Commission. That project would bring more wind-generated power into the state from Iowa, potentially driving down energy prices. Clean Line's project is privately funded and its supporters say it will bring jobs and clean energy to the area. Exelon is considering its own transmission project, Crane said, and sees the company "exporting" power from Illinois to more lucrative markets. The $1.6 billion project proposes a 765-kilovolt line from the Ohio border through Indiana to the northern portion of Illinois but Crane said it is still a long way off. Crane reiterated that Exelon opposes government subsidies for wind generators. "If the government believes that they're improving the environment by subsidizing wind, they are wrong," Crane said. "It is going to shut nuclear plants down." Julien Dumoulin-Smith, executive director of equity research for electric utilities at UBS Securities in New York, said it isn't shocking that Exelon would want a more regulated profile, a model that follows its peers. "While it was not clear which direction the company would go," Dumoulin-Smith wrote in a note Wednesday, "we see the latest transaction as firmly re-position the company back towards more of a regulated profile, following peers in the diversified utility group. We think this aspect will be perceived positively, although given Pepco's historic regulatory challenges this is not likely to be an easy execution and integration story." In addition to Commonwealth Edison Co. in Chicago, Exelon owns utilities in Baltimore and Philadelphia and would now own electric and gas utilities in New Jersey, Delaware and Washington, D.C. to serve about 10 million customers. Exelon would acquire Pepco at $27.25 a share, a 25 percent premium to Pepco's closing price of $21.85 on April 25 and a 30 percent premium over the company's last 20 trading days. Pepco was trading Wednesday at $26.74, up 17 percent on the news. Exelon stock fell 4 percent Wednesday after the announcement and mixed first quarter earnings. To finance the deal, Exelon said it was obtaining a bridge loan of $7.2 billion from Barclays and Goldman Sachs. The company said it expects permanent financing will include a combination of equity, long-term debt and cash. The companies said Pepco acqusition is expected to close in the second or third quarter of next year. It requires approvals from Pepco stockholders as well as the Federal Energy Regulatory Commission and several state public service commissions. Pepco would mark the first major transaction for Crane and Exelon since it merged with Constellation Energy in 2012 in a deal valued at about $7.9 billion. Crane would remain president and CEO of the combined company said he does not anticipate moving Exelon's headquarters to Washington D.C. Pepco's CEO Joseph Rigby is retiring, Exelon said. The transaction follows a pattern in recent years by Exelon to increase the benefits its receives from the regulated utilities it owns. For instance, at ComEd in Chicago, the company worked a deal with the legislature to build out a "smart" digital electric grid and make other improvements that will increase the profits it receives for maintaining that equipment going forward. A part of the deal with Pepco, Exelon has agreed to improve reliability at the three utilities and to maintain three regional headquarters. It is also providing $100 million into a "customer investment fund" to assist low income customers, energy efficiency measures and other consumer-facing programs. jwernau@tribune.com Follow @littlewern Follow @chibreakingbiz http://www.energycentral.com/functional/news/news_detail.cfm?did=32334478& |