Energy giant Exelon, owner of Baltimore Gas and Electric Co. and five other utilities, plans to split up its utilities and power generation businesses, including Baltimore-based power supplier Constellation.
Exelon said Wednesday that its board of directors has approved the plan, which would spin off the power generation businesses and form two separate, publicly traded companies.
“It’s really a very good strategic move for us,” said Christopher M. Crane, president and CEO of Exelon, during a conference call Wednesday. “Separation establishes two best-in-class, standalone companies, a high growth, high quality, 100 percent regulated utility and America’s leading clean energy company.”
A parent company, for now called RemainCo, will oversee the six regulated electric and gas utilities, including BGE and Delmarva Power on Maryland’s Eastern Shore.
SpinCo will be the parent company of 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.
Exelon expects to complete the transaction by the first quarter of 2022 and announce permanent company names, senior management teams and board appointments in coming months.
The split should be seamless for customers of BGE and the other utilities, the company said. BGE employs 3,200 people, while Constellation, which opened a headquarters building in Harbor East in 2016, employs 2,500 Constellation and Exelon employees. No decisions were announced regarding Constellation’s headquarters.
Separating the businesses will give each company financial and strategic independence and allow it to better focus on specific customer needs, Exelon said. SpinCo will be able to more easily adapt to an energy landscape with changing technology and growing demand for renewable energy, the company said.
Chicago-based Exelon began an in-depth review of its corporate structure early last year to determine whether to make the change.
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 separate the two.
RemainCo will deliver electricity and natural gas to more than 10 million customers in five states and Washington, D.C. Besides BGE in Central Maryland and Delmarva, which also serves customers in Delaware, those utilities include Atlantic City Electric in southern New Jersey, ComEd in northern Illinois, Pepco in Washington, D.C., and PECO in southeastern Pennsylvania.
Under the separation plan, Exelon shareholders will retain their current shares of Exelon stock and receive a pro-rata dividend of shares of the new company’s stock. The transaction is expected to be tax-free to Exelon and its shareholders for U.S. federal income tax purposes.
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The actual number of shares to be distributed to Exelon shareholders will be determined prior to closing.
Exelon will continue to be led by Crane and the existing management team until the separation is complete through the public listing of SpinCo.
The deal requires final approval of Exelon’s board as well as regulatory approvals but does not require shareholder approval.
Agencies such as the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and New York Public Service Commission must approve the deal.
Exelon said it has invested $22 billion over the last four years to modernize the grid and improve customer service. RemainCo plans to invest an additional $27 billion over the next four years.
BGE and the other Exelon utilities also have launched initiatives in their jurisdictions to expand the use of electricity in transportation and to connect customers with options like solar and battery storage to reduce local air pollution.
SpinCo will operate the nation’s largest fleet of carbon-free nuclear power plants, which produced 150 million megawatt hours of electricity last year — enough to power 13.6 million homes and avoid more than 106 million metric tons of carbon emissions, the company said. The company also operates approximately 12,000 megawatts of hydroelectric, wind, solar, natural gas and oil generation facilities.