Regulatory hurdles may scuttle Exelon’s Public Service buy
Exelon said delays in winning regulatory approval in New Jersey may scuttle its $18.7bn acquisition of Public Service Enterprise Group, the largest utility takeover in US history.
By Agencies |
CHICAGO: Exelon said delays in winning regulatory approval in New Jersey may scuttle its $18.7bn acquisition of Public Service Enterprise Group, the largest utility takeover in US history.
“Completion of the merger is no longer more likely than not,” Chicago-based Exelon, the largest US utility owner by market value, said in a public filing. The company said it will take a charge of $35m to write off costs associated with the transaction.
Exelon is negotiating terms for the acquisition with the staff of the New Jersey Board of Public Utilities, which has demanded concessions. Exelon’s filing on Wednesday doesn’t mean the deal is dead, said Jim Halloran, who manages $33bn at National City Private Client Group in Cleveland including 1.16m shares of Exelon. “It’s negotiating tactic,” Mr Halloran said. “Otherwise, they’d say, ‘We’ve walked away’.”
Also this quarter, Exelon said it will record costs of $741m because of a July 26 ruling in which the Illinois Commerce Commission allowed the company’s Commonwealth Edison utility to collect $8m in increased rates for electricity delivery, less than the $317m it had sought.
Exelon agreed to buy Newark, New Jersey-based Public Service in December ’04 and add to its fleet of cheaply fueled nuclear power plants. The company expected regulatory approval within 18 months, even though New Jersey’s top regulator said then it could take up to two years because of the transaction’s size.
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Exelon’s biggest obstacle to acquiring Public Service had been overcoming concern that the combined company would drive up power prices. Susan J Vercheak, a staff attorney for the New Jersey Board of Public Utilities, estimated in a January public hearing that Exelon could inflate prices by $2.3bn a year. On July 31, Exelon offered $600 million in cash refunds to New Jersey customers through 2008 to help win the board's approval for the acquisition. Without a preliminary agreement ``within the next week or so,'' the transaction might collapse, the company said. Exelon later agreed to extend negotiations with the state until August 21.
The US Justice Department on July 22 gave antitrust approval to the transaction on the condition that Exelon sell 5,600 megawatts of power plants. The Federal Energy Regulatory Commission had given approval a year earlier.
Exelon, owner of utilities in Chicago and Philadelphia, withdrew an offer for Dynegy Inc's Illinois Power Co in 2003 after Illinois lawmakers rejected its terms.
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To contact the reporters on this story: Jim Polson in New York at jpolson@bloomberg.net; Dan Lonkevich in New York at dlonkevich@bloomberg.net.Download
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