Will Exelon get out of the nuclear business? Columnist Joe Cahill, who follows the company closely for Crain’s ChicagoBusiness.com, thinks that Exelon’s current attempt to buy the Washington DC-area utility Pepco is the first step toward re-structuring Exelon away from electricity generation and toward being an electricity provider. Writes Cahill, “Acquiring utility-focused Pepco will reduce power generation to a sideshow at Exelon. Investors sizing up the company will consider nuclear operations an unpredictable outlier and a drag on earnings from the utility business.”
“Wall Street prizes “pure play” companies that concentrate on a single line of business. This preference has unleashed a wave of breakups among America’s largest companies, including Chicago-area stalwarts Motorola Inc., Abbott Laboratories and Kraft Foods Inc.
Mr. Crane, who has slashed Exelon’s dividend and seen its share price decline more than 10 percent on his watch, will face pressure to follow suit. Shedding Exelon’s nuclear fleet would create the simple, monoline investment story Wall Street is demanding.”
Our only question is: who on earth would buy this fleet of aging, dangerous reactors, some of which already are on the verge of shutting down because they can’t compete economically? Okay, another question: Would Exelon be better off just shutting them all down? A spin-off of Exelon’s nuclear business, as Cahill suggests is one option, probably isn’t feasible; Entergy tried that a few years ago but state regulators nixed the idea. There’s little reason to believe an Exelon spin-off attempt would experience a different fate. So, if that route is impossible, and there are no likely buyers, what is Exelon’s alternative? Keeping them running in the hopes that nuclear economics will change? That’s the company’s current strategy, which led to the creation of the Nuclear Matters front group that is now lobbying furiously to change the system. But assuming failure of that effort–and that fight is going on now–will Exelon really have an alternative?
May 12, 2014
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