Exelon Corporation and Delmarva Power owner Pepco Holdings Inc. signed a definitive agreement to combine the two companies in an all-cash transaction. Published reports indicated the transaction was valued at $6.8 billion.
The agreement, which has been unanimously approved by both companies’ boards of directors, brings together Exelon’s electric and gas utilities – BGE, ComEd and PECO – and Pepco Holdings’ electric and gas utilities – Atlantic City Electric, Delmarva Power and Pepco.
The deal would face regulatory approvals from state regulators. The current Delmarva operating center south of Newark as well as other PEPCO administrative operations will be retained. Exelon also committed itself to maintaining charitable contributions in the Pepco Holdings services territories at the highest-ever levels for at least a decade- a total commitment of $50 million.
The combined utility businesses will serve approximately 10 million customers and have a rate base of approximately $26 billion. The transaction will further expand Exelon’s regulated holdings, ensuring a balanced earnings mix as power prices recover. Exelon, based in Chicago, is the largest operator of nuclear power plants. It also operates Conowingo Dam, about 25 miles west of Newark, one of the nation’s larger hydroelectric plants.
Exelon President and CEO Chris Crane said, “Exelon and Pepco Holdings have a compelling strategic rationale for merging, given our geographic proximity and similar utility business models. Our cultures are an excellent match, with a shared focus on operational excellence, environmental stewardship, customer service and support for the communities we serve.”
Pepco Holdings Chairman, President and CEO Joseph M. Rigby, said, “This combination provides significant benefits for all of our stakeholders, including customers, employees and shareholders. Exelon is one of the most respected energy companies in the country, and it is committed to building on the progress our team has made over the last few years to improve system reliability and customer satisfaction. As part of this transaction, Exelon has committed to provide what our customers most want: investments in infrastructure improvements, continuation of our long tradition of philanthropy in our communities and direct customer benefits of $100 million. Our shareholders will benefit from an immediate cash premium, and employees should enjoy even more opportunities as part of a larger company.”
Rigby added that being part of a family of large urban utilities with distinguished emergency response capabilities will be of enormous value to the Pepco Holdings utilities and their customers during major storms. Exelon’s PECO recently struggled with ice storms that led to extended outages just north of the Delaware line.
Rigby had earlier announced plans to retire from the Washington, D.C.-based utility.
As part of the acquisition, Exelon and Pepco Holdings have committed to build on the significant improvements to service reliability that Pepco Holdings has already achieved for Atlantic City Electric, Delmarva Power and Pepco customers.
Delmarva investors recently received disappointing news from the Delaware Public Service Commission, which sharply reduced the size of its rate request, aimed at paying for improvements aimed at further improving reliability of its system.
Pepco had long been seen as an acquisitions candidate as it did not have a contiguous serve area. Exelon-owned BG&E operates between PEPCO’s Delmarva and Pepco service areas. Prior to Exelon acquiring BG&E, the Baltimore-area utility had long been viewed as the future acquirer of Delmarva.
Delmarva and Pepco also slimmed down their operations by selling off generators such as the Indian River power plant in Sussex County and the Edgemoor generating site near Wilmington.
