) has entered into an agreement with IHI Corporation, a Japanese
organization, for the sale of its five fossil and biomass-fueled
power plants in California.
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The assets earmarked for sale are Chinese Station, Jamestown; Rio
Bravo Fresno, Fresno; Rio Bravo Jasmin, Bakersfield; Rio Bravo
Poso, Bakersfield; and Rio Bravo Rocklin, Lincoln. These plants,
with a total capacity of 70 megawatts ("MW"), inked with Exelon's
generation portfolio as a part of its merger with Constellation.
Per the contract, Exelon intends to sale 50% stake in the four Rio
Bravo power plants and 45% stake in the Chinese Station plant to
IHI Corporation. Exelon's subsidiary Exelon Power will continue to
operate these units till the divesture is accomplished.
This transaction will enable Exelon to reposition its assets, which
will in turn, strengthen its generation portfolio.
Currently, Exelon strongly follows a long-term growth strategy,
which primarily deals with steady assets divestments. The company
is continuously divesting its several generation assets in the last
few months. Couple of days ago, Exelon sold three of its Maryland
based coal-fired power plants to Raven Power Holdings LLC, a unit
of Riverstone Holdings LLC for $400 million as a part of its
In second-quarter 2012, Exelon reported operating earnings of 61
cents per share, missing the year-ago figure of $1.05 per share and
the Zacks Consensus Estimate of 63 cents per share.
During second-quarter 2012 earnings press release, Exelon
reaffirmed its full-year 2012 earnings guidance in the range of
$2.55 - $2.85 per share and expected operating earnings in the band
of 65 cents - 75 cents for third-quarter 2012.
We view Exelon Corporation as a well positioned organization with
continuous cost minimization initiatives and accelerating
investment in power plants and transmission activities. In
addition, the company's merger with Constellation will improve its
operational growth in the coming years.
However, we are skeptical about the effects of volatile weather
patterns, rising long-term interest rates and higher operating
costs, which might challenge Exelon's future performance.
Exelon Corporation currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
Chicago, Illinois-based Exelon Corporation, a utility services
holding company, engages in the generation, transmission,
distribution and sale of electricity to residential, commercial,
industrial and wholesale customers. The company competes with