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Exelon Corporation ( EXC - Analyst Report ) announced that its subsidiary Exelon Generation Company, LLC will sell $775 million of senior notes in two tranches. The company expects to close the sale of notes by June 18, 2012, and utilize the proceeds for general corporate purposes.
The first series consists of $275 million senior notes yielding 4.25% interest per year and maturing on June 15, 2022, while the second series consists of $500 million senior notes yielding 5.60% interest per year and maturing on June 15, 2042.
In 2012, Exelon has plans to issue new debts worth $1,325 million and retire debts worth $1,075 million. The $775 million issue is part of that plan and will in turn increase the long-term debt of the company. Outstanding long-term debt was $17.4 billion as of March 31, 2012. Ameren Corporation ( AEE - Analyst Report ) , an Exelon peer, had long-term debt of $6.7 billion as of March 31, 2012, marginally down from $6.9 billion at the end of the first quarter 2011.
The long-term debt-to-equity ratio of Exelon at the end of the first quarter 2012 was 44.5%. The ratio will increase to 45.5% with the issue of new debts.
Interest expenses in the first quarter 2012 rose by $14 million year over year to $195 million mainly due to higher debt levels. With the issue of new debts, interest expenses will rise further in the coming quarters.
Exelon nevertheless boasts of a strong financial position. The company exited the first quarter of 2012 with cash and cash equivalents of $831 million. Cash provided by operating activities in the first quarter totaled $977 million. The financial strength will allow Exelon to easily meet the enhanced interest burden.
Exelon’s first quarter earnings of 85 cents per share were ahead of our estimate. The company expects earnings per share in 2012 in the range of $2.55 to $2.85, with Exelon Generation contributing strongly in the range of $1.75 to $1.95 per share.
The Zacks Consensus Estimates for second-quarter 2012 and fiscal 2012 are currently at 68 cents per share and $2.89 per share, respectively.
Exelon Corporation retains a Zacks #3 Rank (short-term Hold rating). We maintain a longer-term Neutral recommendation on Exelon.
Based in Chicago, Illinois, Exelon Corporation, a utility services holding company, engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers.
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