Exelon makes progress on Pepco merger, power plant divestitures in 2014

Exelon Corp. (NYSE: EXC) on Feb. 13 reported a busy year in 2014, including the sale of coal-fired power plant (Keystone and Conemaugh plants) in Pennsylvania.

2014 highlights include:

  • Pepco Holdings Inc. (PHI) Merger – On Nov. 20, 2014, the Federal Energy Regulatory Commission (FERC) approved the proposed merger of Exelon and PHI. In addition, on Nov. 21, 2014, Exelon and PHI each certified that it had substantially complied with the Department of Justice request under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). Accordingly, the HSR Act waiting period expired on Dec. 22, 2014, and the HSR Act no longer precludes completion of the merger. Although the DOJ allowed the HSR Act waiting period to expire without taking any action with respect to the merger, the DOJ has not advised Exelon or PHI that it has concluded its investigation. On Feb. 11, 2015, the New Jersey Board of Public Utilities (NJBPU) approved the proposed merger of Exelon and PHI. As part of the approval, the NJBPU also approved a settlement agreement, which was previously signed and filed by Exelon, PHI, Atlantic City Electric (ACE), NJBPU staff and the Independent Energy Producers of New Jersey. The merger continues to be conditioned upon approval by the Public Service Commissions of the District of Columbia, Delaware and Maryland. Exelon and PHI continue to expect the merger to be complete in the second or third quarter of 2015.
  • Asset Divestitures – Exelon closed the following generating asset sales during the fourth quarter: Fore River combined cycle gas turbine (CCGT) in Massachusetts, West Valley combustion turbine (CT) in Utah, and Exelon’s ownership interests in the Keystone and Conemaugh coal plants in Pennsylvania. The transactions resulted in cumulative pre-tax gains of approximately $83m. Subsequent to year end, Exelon also closed the sale of the Quail Run CCGT in Texas. To date, generating asset divestitures have yielded $1.8bn of pre-tax cash proceeds ($1.4bn after-tax), which are expected to be used primarily to finance a portion of the acquisition of PHI and for other corporate purposes.
  • Constellation – On Nov. 1, 2014, Exelon Generation acquired the competitive retail electric and natural gas business activities of Integrys Energy Group Inc. through the purchase of all of the stock of its wholly-owned subsidiary, Integrys Energy Services Inc. (Integrys) for a purchase price of $332m. The generation and solar asset businesses of Integrys are excluded from the transaction. Generation recognized a $28m after-tax bargain-purchase gain.
  • Nuclear Operations – Exelon Generation’s nuclear fleet, including its owned output from the Salem Generating Station and beginning April 1, 2014, 100 percent of the CENG units, produced 44,533 gigawatt-hours (GWh), of which 8,890 GWh were produced by CENG, in the fourth quarter of 2014, compared with 35,329 GWh in the fourth quarter of 2013. Excluding Salem, the Exelon-operated nuclear plants at ownership achieved a 94.8 percent capacity factor for the fourth quarter of 2014, compared with 92.3 percent for the fourth quarter of 2013. The number of planned refueling outage days totaled 97 in the fourth quarter of 2014, compared with 94 in the fourth quarter of 2013. There were eight non-refueling outage days in the fourth quarter of 2014, compared with 33 days in the fourth quarter of 2013.
  • Fossil and Renewable Operations – The dispatch match rate for Generation’s gas/hydro fleet was 99.1 percent in the fourth quarter of 2014, compared with 99.3 percent in the fourth quarter of 2013. Energy capture for the wind/solar fleet was 96.4 percent in the fourth quarter of 2014, compared with 94.5 percent in the fourth quarter of 2013. The increase in energy capture for the fourth quarter of 2014 was due to the implementation of reliability programs that resulted in increased turbine availability.

Stakes in the two Pennsylvania coal plants were sold to ArcLight

Two affiliates of equity investor ArcLight Capital Partners on Jan. 9 notified the Federal Energy Regulatory Commission that they had completed a buy of stakes in the coal-fired Keystone and Conemaugh plants in Pennsylvania. On Dec. 23, the commission authorized the acquisition of existing generation facilities, related to the transfer of undivided ownership interests in the Conemaugh Electric Generating Station and Keystone Electric Generating Station from Constellation Power Source Generation LLC and Exelon Generation Co. LLC to Arclight’s Chief Conemaugh Power LLC and Chief Keystone Power LLC. “This letter is to advise the Commission that the Transaction was completed on December 31, 2014,” said the Jan. 9 filing.

Constellation Power had held a 20.99% undivided ownership interest as a tenant-in-common in the Keystone Station and a 10.56% undivided ownership interest as a tenant-in-common in the Conemaugh Station. Exelon Generation held a 20.99% undivided ownership interest as a tenant-in common in the Keystone Station and a 20.72% undivided ownership interest as a tenant-in-common in the Conemaugh Station. Constellation Power and Exelon Generation had rights to approximately 535 MW of energy and capacity from Conemaugh and 718 MW of energy and capacity from Keystone.

Keystone is a 1,711-MW coal-fired facility located in Shelocta, Pa. Conemaugh is a 1,711-MW coal-fired facility located in New Florence, Pa. They are interconnected to the transmission system owned by Pennsylvania Electric and operated by PJM Interconnection.

Calpine Corp. (NYSE: CPN) on Nov. 7 completed the acquisition of the Fore River Energy Center natural gas-fired, combined-cycle power plant located in North Weymouth, Massachusetts. Calpine purchased the plant, which has a nameplate generating capacity of 809 MW, for $530m plus adjustments.

West Valley Power LLC on Dec. 23 filed with the Federal Energy Regulatory Commission a revised market-based rate tariff to reflect certain modifications required by a buy of the West Valley CT from Exelon. West Valley owns and operates the West Valley Power Plant, a 189-MW gas-fired, simple-cycle facility located in West Valley City, Utah, in the PacifiCorp-East balancing authority area in the Northwest region. The commission authorized the transaction on Nov. 18 and it was consummated on Dec. 3. The new plant owner is affiliated with Wayzata Investment Partners LLC.

Starwood Energy Group Global LLC said Feb. 9 that one of its affiliates had completed the purchase of the Quail Run Energy Center natural gas-fired combined cycle facility in Odessa, Texas. Starwood Energy assumed ownership and began operating the power plant in January. The facility began commercial operations in 2007 and has a nominal capacity of 550 MW. It provides electric power to the Electric Reliability Council of Texas (ERCOT) system. This is the ninth natural gas-fired generating facility built or acquired by affiliates of Starwood Energy since 2006. Starwood had announced in September 2014 that an affiliate had entered into an agreement with affiliates of Exelon to acquire this power plant.

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.