Exelon Corporation (EXC), one of the nation's largest electric utilities, fulfills its Constellation-merger conditions by deciding to sale three of its Maryland based coal fired power plants to Raven Power Holdings LLC, a unit of Riverstone Holdings LLC for $400 million. This transaction is subject to the approvals of Federal Energy Regulatory Commission (“FERC”) and U.S. Department of Justice (“DOJ”), and is expected to be completed by fourth-quarter 2012.
During merger filing with FERC, both the companies assured that this merger will not root competitive concerns. Exelon plans to sell the concerned operations within 180 days after the closing of the transaction to keep its earlier commitments.
The assets earmarked for sale are Brandon Shores, Pasadena; C.P. Crane, Middle River; and H.A. Wagner, Pasadena. Exelon will continue to operate these coal fired unit till the divesture is accomplished.
This transaction is expected to generate cash-tax benefits of $205 million. The major part of the net proceeds will supposedly be realized in 2012 and 2013. On account of variation between sale price and carrying value of the plants, Exelon will post a pre-tax loss of roughly $275 million in the third quarter of 2012. The gain from the sale is expected to be optimally used by Exelon for enhancement of its core operations.
In second-quarter 2012, Exelon reported operating earnings of 61 cents per share, missing the year-ago figure of $1.05 per share and the Zacks Consensus Estimate of 63 cents per share.
During second-quarter 2012 earnings press release, Exelon reaffirmed its full-year 2012 earnings guidance in the range of $2.55 – $2.85 per share and expected operating earnings in the band of 65 cents – 75 cents for third-quarter 2012.
We view Exelon Corporation as a well positioned organization with accelerating investment in power plants and transmission, and ongoing cost containment efforts. In addition, the company’s merger with Constellation will boost its operational growth in the coming years.
Our major concerns regarding the company revolve around the effects of volatile weather patterns, rising long-term interest rates and higher operating costs.
Exelon Corporation currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Chicago, Illinois-based Exelon Corporation, a utility services holding company, engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. The company competes with Ameren Corporation (AEE).
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