(Bloomberg) — Exelon Corp. is considering a breakup that would involve separating its non-utility assets, according to people familiar with the matter.
The Chicago-based company is working with advisers to evaluate the split, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made and Exelon could opt to keep its current structure, they said.
“As we most recently communicated on our second quarter earnings call, we regularly review our corporate structure and overall mix of businesses to determine how to best create value and position our businesses for success,” William Gibbons, a representative for Exelon, said in a statement.
Exelon’s non-utility operations include 21 nuclear reactors as well several solar, wind and natural-gas generating assets, according to its website. 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.
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.
Activist investor Corvex Management said last week that Exelon could be worth roughly $60 a share, and that the company should separate its utility business to unlock that underlying value.
Exelon rose 2% to close at $39.98 on Monday, giving the company a market value of about $38.9 billion. The stock rose about 7% in late trading.
During Exelon’s earnings call in August, Chief Executive Officer Christopher Crane said the company regularly evaluates whether to split up its utility and non-utility assets.
“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,” he said. “And as we see assets that could perform better in somebody else’s portfolio and we could monetize those assets, we’ll do that.”
Finding a buyer for Exelon Generation, the company’s non-utility arm, would be tough, and a spinoff to shareholders is a more likely result, said Kit Konolige, utilities analyst for Bloomberg Intelligence.
While Exelon’s gas plants would probably be attractive to potential buyers, its nuclear reactors would complicate any deal, he said.
The company has lobbied for subsidies in states including New York and Illinois, arguing that some of its reactors are uneconomic and would close without bailouts. That means the facilities have little value beyond the amount they receive from the states, Konolige said.
The most likely potential buyer would be another utility that wanted to bulk up its generation, he said, adding that such a buyer would likely face the same struggles as Exelon.
“Most utilities would note that Exelon hasn’t been able to prove that it’s a good thing to have a utility combined with merchant plants and a bunch of nuclear plants,” said Konolige. “There might not be that many interested buyers.”
(Updates with analyst comment starting in 10th paragraph)
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