Exelon, owner of Baltimore-based Constellation and BGE, weighs splitting business

Energy giant Exelon, owner of Baltimore Gas and Electric Co. and five other utilities, is weighing the benefits of spinning off its power generation business, including Baltimore-based power supplier Constellation, to form a separate company.

Exelon is in the early stages of the review and doesn’t expect additional updates until early next year, executives said.


If the company approves such a split, it could be beneficial for Baltimore, especially if Constellation remains headquartered in the city but as part of an independent company.

Chicago-based Exelon began an in-depth review of its corporate structure earlier this year to determine whether to separate the generation side from the utilities, Exelon CEO Chris M. Crane confirmed during a recent company conference call with analysts.


“No decision has been made, but we continue to do the work to determine the best outcome for our stakeholders,” said Crane, adding that a separation could involve complex issues regarding operations, finances and regulations. He said the company has brought in outside advisers to help.

“What we want to make sure is that we have two healthy companies, a utility business — if we and the board determine this is the right thing to do, two healthy businesses that can stand on their own and provide the support needed for the balance sheets, the customers, the employees, the shareholders, as we go forward.”

In recent years, energy companies that own both regulated utilities, with more predictable returns, and market-based power generating businesses that can be riskier have looked to spin off the market-based side, said Karyl Leggio, a professor of finance at Loyola University of Maryland.

A spinoff would create a new publicly traded company by distributing shares of the generation business to existing shareholders.

“Sometimes the belief is there is value that’s locked up that investors aren’t realizing, and it’s better to split apart,” Leggio said. “Sometimes the companies spin off the market-based [businesses] so shareholders can own just utilities and others own just the market-based business. That’s become a bit of a trend.”

In July, Berkshire Hathaway acquired the natural gas and transmission storage assets of Dominion Energy in a deal worth $10 billion.

Exelon operates utilities in Delaware, Illinois, Maryland, New Jersey, Pennsylvania and Washington, D.C., including BGE, Delmarva Power and Pepco. It also owns Constellation, a competitive retail and wholesale supplier of power and natural gas; and Exelon Generation, which operates the nation’s largest fleet of nuclear power plants along with natural gas, hydroelectric, wind, solar, landfill gas and oil facilities.

Exelon acquired Baltimore’s Constellation Energy Group, the parent of BGE, for $7.9 billion in 2012.


The energy firm undertook a similar review in 2017 but opted not to split the business. But lately investors, including activist investor Corvex Management, have pressured Exelon to take another look.

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Experts say an outright sale of the business is unlikely.

Exelon’s nuclear plants have been losing money as natural gas prices have dropped and Exelon has failed to get government subsidies to run the plants. The company is planning to close two Illinois nuclear plants next fall, including Byron Generating Station, which had been licensed to operate for 20 more years, and Dresden Generating Station, which had been licensed for an additional decade.

Leggio she wouldn’t be surprised if a spinoff happens, and “in general that’s a good thing for Baltimore and a good thing for shareholders.”

It likely would mean Constellation would continue to be based in Baltimore and possibly gain some new executive and management-level employees, she said.

An Exelon spokesman said Thursday that it’s too early to speculate on the outcome of the review or how such a move might affect various parts of the business.


“What we can say is that we are committed to ensuring that customers continue to receive the same high level of service regardless of the direction we take,” said Paul Adams, a spokesman.

The company plans to provide an update in February during its fourth-quarter earnings announcement.