The merger between Exelon Corporation EXC and Pepco Holdings Inc. POM has been approved by the Delaware Public Service Commission (PSC) upon the terms set forth in the parties’ application in the Amended Settlement Agreement filed with the PSC on Apr 7, 2015. The companies submitted their original application to merge to the PSC on Jun 18, 2014.
The Amended Settlement Agreement provided for over $42 million in direct benefits, and other economic benefits to Delaware and Delmarva Power customers. The terms also promote energy efficiency and support workforce development.
Signed in April last year, the merger will combine Exelon’s three electric and gas utilities – BGE , ComEd and PECO Energy Company – with Pepco Holdings’ electric and gas utilities – Atlantic City Electric, Delmarva Power and Pepco.
The merger also received approvals from the Maryland PSC in May 2015 and the New Jersey Board of Public Utilities in Feb 2015, and from the Federal Energy Regulatory Commission in Nov 2014, the Virginia State Corporation Commission in Oct 2014 and Pepco Holdings’ shareholders in Sep 2014.
The merged entity will serve about 10 million customers and have a rate base of roughly $26 billion. Exelon and Pepco expect to complete the merger in the second or third quarter of 2015, subject to approval by the Public Service Commission of the District of Columbia.
The similar business models of Exelon and Pepco and existing assets in close proximity will be an added advantage for the merger. Exelon management believes this merger will contribute nearly 15 cents to 20 cents to the bottom line from the first full year of joint operations.
Last month, Exelon reported first-quarter 2015 adjusted operating earnings of 71 cents per share, surpassing the Zacks Consensus Estimate of 68 cents by 4.4% and above the company’s guided range of 60–70 cents.
Quarterly earnings also improved 18.3% from 61 cents per share in the year-ago quarter. The upside was driven by lower storm costs and favorable weather at PECO Energy and higher distribution revenues pursuant to increased rates, effective Dec 2014 at Baltimore Gas and Electric.
Currently, Exelon carries a Zacks Rank #3 (Hold), while Pepco Holdings holds a Zacks Rank #4 (Sell). Better-ranked stocks in the same industry include National Grid plc NGG and RWE AG RWEOY. Both stocks sport a Zacks Rank #1 (Strong Buy).
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