Exelon Buying PEPCO

Pepco Holdings has agreed to be acquired by Chicago-based nuclear energy giant Exelon in an all-cash deal.  Exelon's all-cash transaction is based on a $27.25 share price that represents a 24.7 percent premium to Pepco Holdings’ closing price of $21.85 on April 25. That would value the deal at about $6.8 billion based on the number of outstanding shares reported in Pepco’s most recent securities filing.

The agreement comes three years after Exelon bought Baltimore-based Constellation Energy Group, parent of Baltimore Gas and Electric, for $7.9 billion in a deal that extended Exelon’s reach into 38 states and two Canadian provinces.

Exelon, which owns 23 nuclear power plants, is acquiring a gas and electric transmission company that is one-fifth its size. Pepco, having sold its power plants several years ago, no longer generates its own electricity and instead buys it from others. Pepco has more than 2 million customers stretching from Washington and its Maryland suburbs, east to the Delaware shore and north to New Jersey.

The deal has been approved by the boards of directors at both companies and must still be endorsed by Pepco shareholders. Exelon also agreed to provide up to $100 million — or about $50 a customer — to give Pepco customers benefits such as rate credits, assistance for low income customers and energy efficiency measures.

Like the earlier merger, this one will require approval from the Federal Energy Regulatory Commission, which will weigh Exelon’s potential market power. It also will require an antitrust review by the Justice Department and the Federal Trade Commission, as well as approval by the public service commissions in three states and the District of Columbia. In the past, some mergers — such as Florida Power & Light’s bids for Constellation and Entergy — have been scuttled by the failure to obtain approvals.

Exelon’s vast portfolio of nuclear power plants generates 55 percent of the power it sells. Its reactors are at 14 facilities in Illinois, Maryland, Nebraska, New Jersey, New York and Pennsylvania. It also owns 32 fossil fuel plants that stretch from Utah to Texas to Massachusetts.

Pepco, formerly the Potomac Electric Power Co., began as a subsidiary of a Washington electric streetcar company, selling its surplus power to other cable car operators. The company sold off the transit part of the business under the Public Utility Holding Company Act of 1935 and concentrated only on selling power to businesses and residential customers.  (Wash Post, 4/30/2014)