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Today’s must-read: Exelon’s free-fall

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* Exelon’s stock price has plummeted 60 percent since its 2008 peak. Last year, the company cut its dividend by 41 percent. Crain’s has a very good story about what has happened to the former titan. It basically boils down to a toxic combination of a quickly changing industry model, natural gas prices and its unregulated price market…

As its nuclear plants increasingly look like an albatross rather than a boon, Exelon is at a crossroads. The future of power generation and distribution is uncertain, but demand for electricity is slack and likely to remain so because of improvements in energy efficiency. Many predict that the industry gradually will move away from behemoth central power stations like Exelon’s nukes. Instead, it would feature smaller plants that can cycle on and off with fluctuations in demand coupled with on-site power sources in homes and businesses such as solar panels or even small-scale natural gas generators.

Mr. Rowe’s successor, CEO Christopher Crane, faces a series of difficult options, none of them obvious winners. Exelon could try to buy more regulated businesses, hedging risks in the power markets with predictable returns. It could attempt to catch up to rivals that have aggressively pursued renewable energy, although it’s late to the party and would have to pay top dollar. Or it could split into two companies: a regulated, supersized electric utility and an unregulated power generator.

The decisions Mr. Crane and his board make in the next several years could determine whether Exelon remains one of the country’s leading forces in the power business or cedes that position to companies that have moved in different directions.
“What does (Exelon) want to be when it grows up?” says Julien Dumoulin-Smith, an analyst at UBS Securities LLC in New York.

The company’s fate matters greatly to Chicago. The parent of Commonwealth Edison Co., Exelon has 26,000 employees, 12,500 of whom work in Illinois, including 6,700 in the Chicago area.

Go read the whole thing. Interesting stuff. And why should you read it? Exelon is a hugely powerful company and it’s not afraid to pull levers and strings when it needs something. I get the feeling it needs something.

posted by Rich Miller
Monday, Jun 23, 14 @ 10:18 am

Comments

“We love free markets*!!” — Exelon

*except when we don’t

Comment by Abe the Babe Monday, Jun 23, 14 @ 10:54 am
So when the EPA puts their thumb on the scale to reduce output from coal fired electrical generation, I wonder who is to benefit?

Comment by Plutocrat03 Monday, Jun 23, 14 @ 11:02 am
Exelon is setting up to be the hero with the new emissions standards. If the state can guarantee a market for their base load generation we won’t have to subject ratepayers to costly upgrades to our coal plants.

Comment by Anonymous Monday, Jun 23, 14 @ 11:03 am
If anyone has invested well enough in positive outcomes, it’s Exelon. Lube up those levers and resin up those strings, the music is about to start.

Comment by A guy... Monday, Jun 23, 14 @ 11:42 am
I see some rate increase legislation in the pipeline.

Comment by foster brooks Monday, Jun 23, 14 @ 11:50 am
Exelon made a series of bad decisions, as John Rowe admits in this article. Now they want a bailout. simple corporate welfare.

Comment by Chicago Cynic Monday, Jun 23, 14 @ 12:02 pm
–So when the EPA puts their thumb on the scale to reduce output from coal fired electrical generation, I wonder who is to benefit?–

Breathers?

Comment by wordslinger Monday, Jun 23, 14 @ 12:07 pm
Another issue lurking out there with nuke plants is decommissioning costs. With around a forty year life span, many of these plants will be ready to shut down within a decade. What do you do with all that radioactive material and machinery?

Comment by Cook County Commoner Monday, Jun 23, 14 @ 1:32 pm
I see the nuclear plant in Clinton is hiring a communications specialist. I imagine that job will be quite eventful for its future occupant.

Comment by Dirty Red Monday, Jun 23, 14 @ 2:01 pm
“In hindsight, I should have sold a piece of our nuclear when times were good and taken more risk on (transmission and distribution) assets, but I did not.

John Rowe, retired CEO, Exelon Corp.”

Comment by Chicago Cynic Monday, Jun 23, 14 @ 2:20 pm
Chicago Cynic is right. Faced with a decade of bad business decisions, Exelon now sees EPA climate change regs as the savior (bailout vehicle) for their woes.

Exelon’s plants are unprofitable because they own too much generation in the part of Northern Illinois that is on the PJM electric grid, which stretches to the east coast, but is separated by transmission bottlenecks that prevent exports. The long-term solution is to build high-voltage transmission lines, but that would take several years and cost hundreds of millions.

Or they can just “invest” $1-2 million in lobbying costs, manipulate the levers of Illinois government and overcharge ratepayers for power from nuclear plants that we already paid for twice.

Comment by Senator Clay Davis Monday, Jun 23, 14 @ 2:28 pm
wonder what happened to all those public sector employees at a high level who migrated over to Exelon. are they still around?

Comment by Amalia Monday, Jun 23, 14 @ 4:02 pm
Amalia, you mean the legislators like Marlow Colvin? Yup - still there. And Clay Davis - AMEN!

Comment by Chicago Cynic Monday, Jun 23, 14 @ 5:54 pm