Exelon to sell three Maryland coal plants to new unit of Riverstone Holdings

Exelon (NYSE: EXC) said Aug. 9 that it has reached an agreement to sell its three Maryland coal-fired power plants to Raven Power Holdings LLC, a new portfolio company of Riverstone Holdings LLC.

This deal fulfills its commitment to regulators to divest the plants, for regional market power mitigation reasons, as part of its merger with Constellation Energy. Under the agreement, Raven Power will maintain jobs with comparable pay and benefits for employees at the plants. Exelon is also the nation’s largest nuclear power company and hasn’t shown much interest in new coal capacity in recent years.

“The sale of these plants marks another important milestone in meeting our merger commitments,” said Christopher Crane, Exelon’s president and CEO. “Until the divestiture is completed, Exelon will continue to run these plants as we have in the past and in compliance with all regulations, and we look forward to a smooth and successful transition to the new owner.”

The three plants, known collectively as Maryland Clean Coal, include:

  • Brandon Shores, Pasadena, Md., 1,273 MW of installed capacity, two units (coal);
  • C.P. Crane, Middle River, Md., 399 MW installed capacity, three units (coal and oil); and
  • H.A. Wagner, Pasadena, Md., 976 MW installed capacity, five units (coal, natural gas and oil).

Raven Power will pay about $400m for the plants and related assets, subject to several closing adjustments. In addition, the sale will generate approximately $205m in cash tax benefits, with the majority of that amount realized in 2012 and 2013. Exelon will record a pre-tax loss estimated to be approximately $275m in the third quarter to reflect the difference between the estimated sale price and the carrying value of the plants. Exelon will determine the optimal use of the sale proceeds through its normal planning process.

“The Maryland Clean Coal plants have an experienced workforce and a strong record of safe and environmentally sound operation. We are very pleased to be adding these plants to our portfolio,” said Pierre Lapeyre and David Leuschen, co-founders of Riverstone.

The sale was required by the Federal Energy Regulatory Commission, U.S. Department of Justice and the Maryland Public Service Commission as part of Exelon’s merger agreement. The transaction, which is subject to approval by FERC and DOJ, is expected to close in the fourth quarter of 2012.

Since 2008, the three coal plants have undergone major environmental upgrades, including investment in a new scrubber at Brandon Shores that makes it one of the cleanest coal plants in the nation. The plants comply with the Maryland Healthy Air Act and are well positioned to meet pending Environmental Protection Agency emissions standards, Exelon noted.

Citi and Goldman Sachs & Co. acted as financial advisors to Exelon, and Morgan, Lewis & Bockius served as legal counsel. Vinson & Elkins served as legal counsel to Riverstone.

Exelon is the nation’s leading competitive energy provider, with about $33bn in annual revenues. Headquartered in Chicago, Exelon has operations and business activities in 47 states, the District of Columbia and Canada. Exelon is the largest competitive U.S. power generator, with about 35,000 MW of owned capacity.

Founded in 2000, Riverstone Holdings is an energy and power-focused private equity firm with over $22bn of equity capital raised across seven investment funds and co-investments, including the world’s largest renewable energy fund. Riverstone conducts buyout and growth capital investments in the midstream, exploration and production, oilfield services, power and renewable sectors. With offices in New York, London and Houston, the firm has committed about $18.9bn to 88 investments in North America, Latin America, Europe and Asia.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.