Exelon chief won’t rule out plant purchases, divestitures

Exelon (NYSE:EXC) CEO Chris Crane said Oct. 30 that his company will not “sit on its hands” in the current market and “we will shut down facilities” that are not performing well.

His comments came during the company’s regular quarterly earnings conference call with financial analysts.

At the same time Exelon might look to grow its portfolio when it makes sense, Crane said. The Exelon CEO also noted that Exelon already has an option to purchase the EDF Group interest in the Constellation Energy Nuclear Group (CENG) in the next few years.

On July 30, Exelon announced that the three commercial nuclear power plants operated by CENG in New York and Maryland will be integrated into the Exelon Generation nuclear fleet.

Under the terms of the agreement, the CENG operating licenses will be transferred to Exelon; Exelon will integrate the CENG fleet under its management model; Exelon will lend $400m to CENG to support a special dividend to EDF Group; and EDF will retain an option to sell its CENG stake to Exelon at fair market value between 2016 and 2022.

When asked by a financial analyst if Exelon was prepared to buy out the EDF interest as early as 2016, Crane indicated Exelon was prepared for that option. There is an agreed-upon process for determining fair market value of the nuclear units, Crane said.

During the call, Crane also suggested Wall Street was not fully weighing the potential PJM market impact of anticipated coal plant retirements in the region. Exelon, which is heavy into low-emitting generation, hopes to capitalize starting around 2015.

Exelon has said that it could benefit from a $2-to-$4 power price upturn in PJM as the collective impact of industry coal retirements starts to mount.

On another issue, Crane said he was pleased to see recent federal court rulings against state-endorsed new natural gas power plants in Maryland and New Jersey.

Existing fleet runs well in recent quarter

The Exelon power plant fleets had a strong operating quarter with 94.8% nuclear capacity factor and 99.1% fossil and hydro dispatch match. The 94.8% nuclear mark for 3Q13, compared with 90.7% for 3Q12.

There were five nuclear non-refueling outage days in 3Q13, compared with 40 days in 3Q12, Exelon said.

 The company’s Continental Wind unit has financed a 667 MW wind portfolio across six states, Exelon said. On Sept. 30, Exelon’s indirect subsidiary closed its financing of $613m in 6% senior secured notes due Feb. 28, 2033.

Exelon Generation’s average realized margin on all electric sales, including sales to affiliates and excluding trading activity, was $26.19/MWh in 3Q13, compared with $25.96/MWh in 3Q12.

Exelon is still expecting flat load growth in 2013. Company officials also said there have been delays at a portion of Antelope Valley Solar Ranch project in California.

Exelon’s adjusted (non-GAAP) operating earnings increased to 78 cents per share in the third quarter of 2013 from 77 cents per share in the third quarter of 2012. Exelon attributed its numbers to increased capacity prices related to the Reliability Pricing Model (RPM) for the PJM market; savings through its merger with Constellation Energy and improved nuclear performance.

In some instances, Exelon has been ramping down nuclear units at night in PJM when “negative” pricing is present, officials said.

Exelon owns more than 7,300 miles of electric transmission line.

Exelon’s Commonwealth Edison (ComEd) subsidiary consists of electricity transmission and distribution operations in northern Illinois. ComEd recorded GAAP net income of $126m in 3Q13, compared with net income of $90m in 3Q12.

PECO consists of electricity transmission and distribution operations and retail natural gas distribution operations in southeastern Pennsylvania. PECO’s GAAP net income in 3Q13 was $92m, compared with $122m in 3Q12.

BGE consists of electricity transmission and distribution operations and retail natural gas distribution operations in central Maryland. BGE’s GAAP net income in 3Q13 was $50m, compared with a $4m loss in 3Q12.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.