Consolidation for US nuclear generators

28 April 2011

Exelon and Constellation Energy have announced a $7.9 billion merger. Under the name Exelon, the resulting firm will be America's largest generator of nuclear power by an even greater margin. 


A definitive agreement posted today will see a stock-for-stock transaction combine the two companies. The new firm wants to take advantage of Exelon's large low-carbon generation fleet and Constellation's customer-facing business.


The firm will retain the name Exelon and its current headquarters location in Chicago, although retail and wholesale operations currently under Constellation will be based in Baltimore. Renewables businesses for both firms will be placed in Baltimore and the overall firm will keep its three utility brands, BGE, ComED and PECO. It will count a generation portfolio of over 34,000 MWe, of which about 19,000 is nuclear from 22 reactors. About 55% of delivered electricity would come from this.


Constellation shareholders will receive 0.930 shares of Exelon stock for each Constellation share, which works out to a value of $38.59 per share and a total equity value of $7.9 billion. These shareholders may be pleased with management efforts over the last few years, having rejected a credit-crunch buyout offer from MidAmerican Energy Holdings of just $4.7 billion for what was then actually a larger company.


Current Exelon president and COO Chris Crane will be president and CEO of the new company, while current Constellation chair, president and CEO Mayo Shattuck will be the new firm's executive chair. Exelon's current chair, John Rowe, will retire. Crane said the new company will be "well positioned to benefit from a changing industry environment while managing risk and positioning ourselves to benefit from power market recovery."


Nuclear expansion plans for both companies have faltered over the last two years on the drop in power demand due to the financial crisis and the increasing availability of cheap gas.


Exelon had proposed to build two new units at Victoria County in Texas but licensing for this has been downscaled to just an Early Site Permit.


Constellation was a 50% partner in the Unistar initiative to build a fleet of Areva EPRs in America. A proposal for Calvert Cliffs has the most promising of this effort, but the company pulled out last year and sold its stake cheaply to the other partner, EDF of France. This had come after Constellation sold half of its nuclear generation business to EDF for some $4.5 billion, rejecting an offer of $4.7 billion for the entire company from MidAmerican Energy Holdings. Constellation shares had plunged on the financial crisis. For its part during that crisis, Exelon had tried to buy out another huge US generator, NRG, for $6.2 billion.


The nuclear fleet of the expanded Exelon will include its 17 reactors across ten sites: Braidwood, Byron, Clinton, Dresden, LaSalle, Limerick, Oyster Creek, Peach Bottom, Quad Cities, and Three Mile Island 1. The deal with Constellation will add interests in five more reactors across the Nine Mile Point, Calvert Cliffs and R G Ginna sites.


That fleet further establishes Exelon as the USA's largest nuclear power generator, with 18,490 MWe of nuclear capacity from 22 reactors. The second largest nuclear generator in America is Entergy with 8930 MWe from ten reactors, ahead of Duke Energy with 6996 MWe from seven.
Researched and written
by World Nuclear News