Exelon Corporation

About Exelon Corporation

The City of Brotherly Love meets the Windy City and The Greatest City in America in utility and power generating holding company Exelon. The company distributes electricity and gas to 6.6 million customers in Maryland, northern Illinois and southeastern Pennsylvania through subsidiaries  Baltimore Gas and Electric, Commonwealth Edison (ComEd) and PECO – more... Energy. Subsidiary Exelon Generation holds the company's power assets of 35,000 MW (19,000 MW of which is nuclear). Exelon Power Team is a top wholesale energy marketer, and Exelon Energy markets retail power and offers other energy-related services. In a major move, in 2012 the company bought Constellation Energy in a $7.9 billion stock deal. 

Strategy

The acquisition, part of an industry-wide consolidation trend, gives Exelon access to Constellation Energy's major retail operations in Maryland, enabling it to grow its retail profile. (The regulated retail markets, with their more predictable revenues, tend to do well during times when wholesale markets are down.) Exelon plans to consolidate its power marketing business and Constellation's retail and wholesale business under the Constellation brand and be based in Baltimore. The deal makes Exelon the #1 power generator in the US and the #2 residential electric and gas distributor.

The US Department of Justice required Exelon and Constellation to divest three electricity generating plants in Maryland to proceed with the merger. It contended that combining the companies' assets would potentially enable the merged firm to raise wholesale electricity prices and reduce output.

As part of a portfolio repositioning strategy, in 2012 the company sold its stakes in five California power plants (a total of 70 MW of generating capacity) to Japan-based IHI Corporation.

To meet stricter environmental regulations, the company has been bulking up its non-fossil fuel generating assets. Growing its cleaner-burning plant fleet in Texas, in 2011 the company bought Wolf Hollow, a 720 MW combined-cycle natural gas-fired power plant in north Texas, from Sequent Wolf Hollow, for $305 million.

Expanding its green energy assets, that year the company also agreed to acquire Antelope Valley Solar Ranch One from First Solar. The 230-MW solar power project is under development in northern Los Angeles County. The $1.4 billion investment complements Constellation Energy's solar power holdings and marks Exelon's first move into the California merchant power market.

In 2010, in a bid to grow its renewable energy segment and lower its carbon emissions, the company acquired wind power developer John Deere Renewables for about $860 million. The deal added 735 MW of operating wind power capacity (and 230 MW under development) to Exelon's generation assets.

The green energy power sources complement the core of Exelon's long term energy expansion plan, the development and maintenance of nuclear generating capacity. However, the Fukushima nuclear plant disaster in early 2011 placed Exelon's nuclear power expansion plans under serious scrutiny from regulators and investors.

Financial Analysis

Higher prices and demand lifted revenues in 2011, despite a drop in PECO Energy's revenues due in part to the ending (in late-2010) of its competitive transition charges structure (a levy to help electric utilities pay down stranded costs resulting from the transition from regulated to deregulated markets). In 2011 higher expenses also brought down Exelon's net income.

The company reported improved operating revenues in 2010 thanks to a rebounding economy and an increase in power demand. However, lower margins realized on market and affiliate power sales (due to unfavorable market conditions), and lower mark-to-market gains on hedging activities along with higher nuclear fuel costs dragged down Exelon's net income for the year. – less

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