Chicago-based Exelon is pondering getting rid of its large fleet of uneconomic non-utility nuclear plants, Bloomberg reported. The company’s Exelon Nuclear, a division of its non-utility generating company, runs 21 nuclear plants in the Midwest and the Middle Atlantic region, making it the largest nuclear generator in the U.S.
The nuclear plants bid into the PJM wholesale competitive market and have had problems competing against natural gas plants and subsidized wind generation. As a result, the company’s Illinois plants won state subsidies two years ago designed to make the plants competitive in the wholesale auctions.
Bloomberg noted, “A potential split would leave Exelon focused on the regulated power market, with a portfolio that includes a half-dozen utilities in Pennsylvania, Maryland, Delaware and elsewhere.”
In August, Exelon CEO Chris Crane told investment analysts, “One thing I can tell you is there’s an annual review on all the non-nuclear assets to see if they propose more value to others than we have projected for ourselves, and that annual review will continue. And as we see assets that could perform better in somebody else’s portfolio and we could monetize those assets, we’ll do that.”
Now it appears they are also looking at the nuclear assets.
But are there buyers if Exelon is looking to sell? Citing the credit research company CreditSights, Barron’s reported that Exelon would have a hard time finding a buyer. CreditSights noted that 40% of Exelon’s earnings come from its non-utility generation. CreditSights said it sees “no logical buyers here,” and “we don’t see an easy solution for management to pursue.”
There are some bulls on an Exelon spinoff. New York hedge fund Corvex Management, with initial funding from billionaire investor George Soros, argued that Exelon’s value is about $60/share, while it is trading at around $40/share. Corvex said unloading the competitive generation business could unlock the true value of the $39 billion company.
Bloomberg observed, “Power companies are increasingly unloading unregulated assets to focus on their utilities, in part because investors prefer pure-play businesses. DTE Energy Inc. is considering unloading its non-utilities businesses, people familiar with the matter said last week. Dominion Energy Inc. agreed to sell its natural gas infrastructure earlier this year to Berkshire Hathaway Inc.”
Exelon has also been signaling that it plans to close some of its nuclear plants, putting political pressure on Illinois to come up with subsidies. The company said in August it will close the Byron and Dresden plants in the fall of 2021. A month later, Exelon added its Braidwood and LaSalle generating stations to its list of potential closures, although it did not provide a date for shutting down the plants.
— Kennedy Maize