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Baltimore Gas and Electric Company (“BGE”), an operational unit of Exelon Corporation (EXC - Analyst Report), is set to offer 10-year notes worth $250 million due on August 15, 2022. The senior notes are expected to yield 2.8% interest per year and the offer is slated to close on August 17, 2012.
Exelon’s unit will use the proceeds from this sale to finance its debt obligations especially the ones which are short-term and for corporate purposes.
Exelon and its subsidiaries issues notes from time to time and accumulate funds for expansion projects or to repay debts. On June 18, 2012, the company’s subsidiary, Exelon Generation Company, priced a total $775 million of senior notes in two tranches.
The first series consisted of $275 million senior notes yielding 4.25% interest per year and maturing on June 15, 2022, while the second series comprised $500 million senior notes yielding 5.60% interest per year and maturing on June 15, 2042. The net proceeds from the issue were used for general corporate purposes.
The long-term debt as of June 30, 2012 was $18.1 billion, up considerably from $12.2 billion at year-end 2011. Interest expenses in second quarter 2012 were $261 million, and we believe interest expenses will escalate with this fresh offering of senior notes.
Despite a higher debt level, the debt-to-capital ratio at the end of the second quarter of 2012 was 46.7% versus 48.2% at year-end 2011, due to issue of equities in the first half of 2012. However, with the issuance of notes, the debt-to-capital ratio is expected to increase marginally to 47.1%.
Exelon Corporation retained its full-year earnings guidance range of $2.55 to $2.85 per share and pegged operating earnings in the range of 65 cents to 75 cents per share for the third quarter of 2012. The company expects cash from operations in 2012 to be $5.37 billion and also forecasts the issue of new debts of $1.75 billion during 2012. It expects to shed $1.07 billion of debt during the year.
The Zacks Consensus Estimates for the third quarter and full-year 2012 are currently pegged at 73 cents per share and $2.75 per share, respectively.
Exelon’s closest peer Ameren Corporation (AEE - Analyst Report) also recently announced the sale of senior notes worth $400 million with interest rate of 2.7% due in 2022. The company plans to utilize the net proceeds of this offering along with other surplus cash primarily to redeem its outstanding 9.75% and 6.25% senior secured notes worth $450 million due in 2018 and also $51.1 million 5.50% senior notes due in 2014.
Like Ameren, Exelon currently maintains a Zacks #3 Rank, implying a short-term Hold rating.
Based in Chicago, Illinois, the company engages in the generation of electricity in the United States. It generates electricity from nuclear, fossil, hydro and renewable energy sources.