DC rejects Exelon's Pepco takeover plan, proposes new terms

[SAN FRANCISCO] Exelon Corp's plan to buy Pepco Holdings Inc for US$6.8 billion was rejected by Washington regulators who proposed new terms that would allow the deal to go forward if the companies and other parties agree in 14 days.

The District of Columbia's Public Service Commission voted to reject an earlier merger settlement and to offer new conditions, the commission said Friday in a statement. If those terms are accepted, the takeover is approved with no further action.

Exelon chief executive officer Chris Crane wants to add Pepco's predictable utility revenue. That will help reduce his company's reliance on power sold into competitive wholesale markets by Exelon's nuclear power plants, the largest collection in the nation. Some of Exelon's reactors have been losing money due to low prices.

The changes agreed to Friday "have removed the reservations that I had with the original merger application," commissioner Joanne Doddy Fort said in the statement.

The US utility industry is consolidating in the face of stagnant sales and increasing costs to replace old infrastructure as well as comply with more stringent pollution rules.

Since 2014, about US$123 billion worth of utility deals have been announced in the US, according to data compiled by Bloomberg.

New Terms

The alternative proposal would defer a decision on the allocation of US$25.6 million of customer rate credits until Pepco's next rate case, remove Exelon as the developer of a 5-megawatt solar facility at a DC water treatment plant, create a US$32.8 million fund for upgrading Pepco's distribution system and for energy-efficiency and energy conservation measures and strike provisions regarding Pepco developing microgrids.

"We're pleased that they offered that, and we're going to study it, and we hope to have some decision soon," Vincent Morris, a Pepco spokesman, told reporters after the meeting.

"We need to review them first."

Chicago-based Exelon is working to overcome reservations about the potential impact on Washington's utility customers. The company reached a settlement with mayor Muriel Bowser in October after the commission first voted down Exelon's proposal in August.

"The Commission's order prescribes new provisions that we and the settling parties must carefully review to determine whether they are acceptable," Exelon spokesman Paul Elsberg said in a statement.

"Once we have had a chance to study the order and confer with the settling parties, we will have more to say about what it means and our next steps."

Exelon fell 0.8 per cent to US$31.74 at 11:43 am in New York.

Pepco was little changed.

BLOOMBERG