As a condition of its purchase of Constellation last month, the Chicago energy giant has committed to selling the Brandon Shores and H.A. Wagner plants in Anne Arundel County and the C.P. Crane plant in Baltimore County by the end of the year.
The sale is not expected to be easy, because the economic prospects for coal plants have dimmed, given falling natural gas prices and stricter air-quality regulations due to come online over the next few years, analysts said.
Exelon also agreed not to sell the plants to certain companies that already own facilities in the Mid-Atlantic electricity grid that covers Maryland, limiting the number of potential buyers.
"There's no doubt that these plants face significant challenges in the near term," Morningstar analyst Travis Miller said. "The steep drop in gas prices and the increasing uncertainty around environmental regulations are hurting all coal plants."
Still, Exelon believes the plants are an "attractive investment," spokeswoman Judith Rader said.
She points out that Constellation spent nearly $1 billion in 2010 to install pollution "scrubbers" at the 28-year-old Brandon Shores plant, the largest of the three with the capacity to generate 1,273 megawatts of electricity. The company also installed pollution controls at the Crane and Wagner plants.
Until the pollution controls were installed, the Brandon Shores and Wagner plants, which sit on the same riverfront tract, together had been the nation's leading emitter of hazardous air pollutants, according to data from the Environmental Protection Agency. Since then, Maryland environmental officials and Constellation say, emissions have been reduced significantly.
Crane, in Bowleys Quarters in Baltimore County, is the smallest of the three plants, with a 399-megawatt generation capacity. Since 2010, the facility has been using lower-sulfur coal to reduce polluting emissions.
Rader said the three plants are well-positioned to meet the EPA's pending air-pollution standards.
"The plants are poised to benefit from rising electricity prices as older, higher-polluting coal plants retire," she said.
When Exelon and Constellation announced plans for the $7.9 billion merger last year, they made it known that they planned to sell the three coal plants to preempt regulatory concerns about the market share the combined company would command in the Mid-Atlantic electricity market.
At full capacity, the three Maryland plants can generate 2,648 megawatts, enough to power 1.9 million homes, according to the Edison Electric Institute, a Washington-based industry trade group.
The three coal facilities are expected to be sold together instead of separately. Any deal would require regulatory approval.
John Long, chief operating officer for the three plants, said the news of the plants' sale came as a shock to workers. He said it helped that Exelon agreed with Maryland energy regulators to require any buyer to maintain employment, pay and benefits at the facilities for at least two years.
Of the 450 workers at the three plants, 393 are guaranteed the two-year protection, Long said. The remaining 57 are technical and financial support employees.
Overall, the staff feels uncertainty, Long said.
"You have to remember that the average number of years of service is over 20 years," he said. "They've been with the plants for their entire career, and this is the first time they have had to go through a change like this."
Long said management has kept workers informed about the sale process, holding employee meetings periodically since the merger was announced last year.
"Having gone through the sale and purchase of plants in the last 10 years, just the fact that someone like me talks to the people, even if you don't have answers to any of the questions, it has a significant calming influence," he said.
Exelon's Rader said the company's financial advisers have been in touch with "numerous" potentially interested parties that Exelon believes can offer solid proposals for the plants.
Given the restrictions on potential buyers, Julien Dumoulin-Smith, an analyst at UBS Securities, said that private equity firms were the likely buyers.
"There's a short list of people out there … which would put downward pressure on the sale price," said Dumoulin-Smith, who put a $900 million sale price on the plants. Last fall, some analysts estimated that the plants could fetch more than $1 billion in pre-tax proceeds.
Morningstar's Miller put the sale proceeds a bit lower, at $800 million. Despite the immediate challenges facing the coal plants in Maryland, Miller is bullish on the properties long-term.
"In general, our view is that gas prices are headed up in the long run and power prices are also headed up in the long run," he said. "Given the relatively low operating costs for these plants, we think margins in the long run would expand and they would be valuable assets."