EDF had asked New York state regulators to slow down their review of Chicago-based Exelon plans. Two of the three nuclear power plants that Exelon jointly owns with EDF are in New York; the third is in Maryland.
New York is the only state among the many in which Exelon operates, including Illinois, that must approve the transaction. Further approvals are required from federal agencies. Exelon has requested an expedited review in New York.
The spin-off, which Exelon announced earlier this year, aims to increase the valuation of shares in the company, which tracks other utility holding companies whose operations are fully regulated and not subject to fluctuations in market prices. commodity prices. Exelon’s power plants, especially its largest nuclear fleet in the country, have experienced financial difficulties as wholesale electricity prices have fallen in recent years.
British banking giant Barclays is providing Exelon with a 364-day, $ 880 million term loan to fund the EDF transaction, according to a Securities & Exchange Commission file. The loan goes to Exelon Generation, the company’s power plant, rather than the holding company.
As of June 30, Exelon Generation had $ 1.2 billion in debt due within a year, according to another SEC filing, so that amount nearly doubles that total. In addition, ExGen has long-term debt of $ 4.6 billion.
In 2019 and 2020, Exelon Generation posted negative cash flow of $ 454 million and $ 122 million, respectively.
In the first six months of 2021, the unit suffered a revenue blow when three Texas natural gas-fired power plants failed to operate during the frosty week of February when massive power outages took hold. occurred. But ExGen added $ 327 million in cash, mostly through asset transfers and sales of accounts receivable to banks and a cut in capital spending, according to an SEC filing.
Exelon has insisted to skeptical analysts that the power generation unit will have a prime credit rating once it becomes self-sustaining. How does another $ 880 million debt affect this?
“We continue to maintain an open and constructive dialogue with agencies and remain confident in our ability to maintain quality credit ratings after separation,” Exelon spokesperson Paul Adams said in an email. . “Keep in mind that this transaction also means that in the future, Exelon Generation will retain 100% of the revenues of the factories (in co-ownership) compared to the 50.01% it currently collects. “
The cost of the buyout of EDF, which has been pushing to leave the partnership for nearly two years, comes as no surprise to credit rating agencies, whose ratings will be key to making the spin-off happen, Adams said. .
“The separation will create two financially strong companies that are leaders in their respective industries,” he said.