Dive Brief:
- Exelon Corp., in a Form 8-K filing on Monday, informed the U.S. Securities and Exchange Commission that it intends to purchase FirstEnergy Solutions retail power business for $140 million.
- FirstEnergy Corp.'s competitive generation subsidiary filed for Chapter 11 bankruptcy protection at the end of March. The move had been expected, as FirstEnergy sought to transform itself into a fully-regulated utility company.
- Under the arrangement, Exelon Generation will purchase all of FirstEnergy Solutions' retail electricity and wholesale load serving contracts and certain other related commodity contracts.
Dive Insight:
Exelon says the purchase will help it to grow in the Midwest and Mid-Atlantic states, telling Morningstar it could add almost 1 million customers. The company's shares closed up 0.76% on Tuesday.
In a May earnings call with analysts, Exelon CFO Joseph Nigro indicated the company could be interested in expanding its retail business through an acquisition, and noted that the company had recently acquired the retail businesses of Consolidated Edison and Integrys Energy Group.
"We're always interested in looking at whatever opportunities exist in the marketplace," Nigro said in response to a question about possible acquisitions. "We have a history of acquiring companies ... and we'll continue to do that."
"There has been some change of hands with retailers in the near-term here and we would expect that to continue," Nigro added.
In February, FirstEnergy signaled the bankruptcy filing was imminent; CEO Chuck Jones, in an earnings call, indicated that a final loan to the subsidiary would likely be the last business connection between the two. FirstEnergy has been focused on shifting into a fully-regulated utility company.
The bankruptcy filing included FirstEnergy Solutions, all FES subsidiaries and FirstEnergy Nuclear Operating Co., but did not involve FirstEnergy or its distribution, transmission, regulated generation and Allegheny Energy Supply subsidiaries.
FirstEnergy's merchant subsidiary, like many operators of coal and nuclear plants, has seen its plants fail to compete against cheaper gas-fired generation. FirstEnergy Solutions had asked the U.S. Department of Energy for assistance in getting cost recovery for coal and nuclear plants in the PJM Interconnection market — and then subsequently announced it would retire three nuclear facilities.
Unsecured creditors are owed billions by FirstEnergy Solutions.
It has been two years since FirstEnergy began exploring exiting its commodity-exposed generation business. Its regulated generation fleet includes plants in West Virginia, Virginia and New Jersey.
