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Exelon Sells Few Maryland Assets

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Exelon Corporation (EXC - Free Report) has sold three of its coal-fired power plants to Raven Power Holdings LLC, a unit of Riverstone Holdings LLC, as per its Constellation-merger condition. The total deal value was approximately $400 million.

Per the agreement, Raven Power will keep the jobs with comparable pay and benefits for the existing employees at the plants.

Earlier in March 2012, Exelon merged with Constellation in a stock-for-stock transaction. The total transaction value was $7.9 billion. During the time of merger-filing with the Federal Energy Regulatory Commission (“FERC”), both the organizations guaranteed that this transaction will not cause competitive concerns in the future. To keep up with the commitments, Exelon intended to sell the concerned operations within 180 days after the closing of the agreement.

The assets allocated for selling are jointly known as “Maryland Clean Coal”, which includes the Brandon Shores at Pasadena, the C.P. Crane at Middle River and the H.A. Wagner at Pasadena.

This contract is expected to create a cash-tax benefit of $205 million in the future. Major portion of the net proceeds will supposedly be utilized in 2012 and 2013. On account of distinction between sale-price and carrying-value of those plants, Exelon posted a pre-tax loss of nearly $278 million in operating and maintenance expense in third-quarter 2012. This divestment is expected to generate net after-tax cash sale proceeds of roughly $500 million during 2013, and around $65 million in 2014 and subsequent years. Exelon is expected to primarily utilize the gain from this contract for enhancement of its core operations.

Exelon has already experienced positive impacts related to its merger with Constellation in the third quarter of 2012. Riding on Constellation’s strong contribution, the company’s quarterly revenue increased 34.6% year over year to $7.02 billion. We expect Exelon to realize further synergies going forward.

However, we expect Exelon’s fourth-quarter and full-year 2012 performance to be negatively affected by the impact of Hurricane Sandy.
Chicago, Illinois-based Exelon Corporation engages in generation, transmission, distribution and sale of electricity to the residential, commercial, industrial and wholesale customers.

With a market capitalization of $25.04 billion, the company has 19,267 full time employees. Both Exelon Corporation and one of its peers Ameren Corporation (AEE - Free Report) currently have a short-term Zacks #3 Rank (Hold rating).

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