Exelon Sees More Profit, Growth From Utilities Than From Plants

  • Largest nuclear generator targets 70% regulated earnings
  • Plant spending to tail off, with cash to pipes and wires

Exelon Corp., the largest U.S. nuclear power generator, sees its earnings growth in regulated utilities, Chief Executive Officer Chris Crane said in an interview.

Exelon wants utilities to comprise 70 percent of its profit, up from about 50 percent now, Crane said Wednesday after a meeting with financial analysts, the first since the Chicago-based company bought utility owner Pepco Holdings Inc. for $6.8 billion in March.

That’s a shift for Exelon, which previously had touted a portfolio balanced between earnings from nuclear power and utility profits. The company now plans to devote 80 percent of its capital investment to the regulated business as cheap natural gas from shale basins pummels power prices, hurting wholesale generators. Exelon won’t follow rivals including Southern Co. and Duke Energy Corp. that are buying natural gas pipeline businesses for growth, Crane said.

“We can get a better return on the investments we are making now,” Crane said in the interview in Philadelphia. “We have some pipelines in our utility business, but expanding wouldn’t clear the hurdle.”

The company intends to invest as much as $3.2 billion of cash flow from its generation operations through 2020 in its utilities, investments that will earn stable returns from regulators. The strategy depends in part on adding $465 million a year to revenue at Pepco utilities through rate requests with federal and state regulators. Cash from Exelon’s power plants, rather than equity sales, will fund utility investments that regulators want, company executives said at the meeting.

Spending at the generation business will fall under the plan. Growth capital will plummet to $100 million in 2018 after reaching $1.18 billion this year as the company completes several plants. Surplus capital will reduce debt at the unit, and perhaps at the parent, Crane said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE