The largest operator of a nuclear power fleet in the U.S., Exelon Corporation (EXC) now forays into the wind power generation business by acquiring wind assets from Deere & Company (DE) for $900 million. The initial value of the acquisition is $860 million, while Exelon will pay another $40 million to Deere when the construction work begins in some approved projects. The acquired assets will be operated by Exelon’s subsidiary Exelon Generation Co.
 
This acquisition of Deere’s wind energy business, John Deere Renewables, LLC, will boost the existing generation portfolio of Exelon by 735 megawatts. Additionally, the company will have rights to pursue Deere’s pipeline project, which comprises 1,468 megawatts of new wind projects in development, including 230 megawatts in an advanced launching stage.
 
Prior to this acquisition, Exelon did not possess any wind generation plant. The company was a wholesale marketer of 352 megawatts of wind energy in Illinois, Pennsylvania and West Virginia with some long-term power purchase agreement sealed with wind energy generators.
 
The company expects to close the deal during the fourth quarter of 2010, which will be accretive to the company’s earnings from 2012 and cash flows from 2013. The acquisition will be funded from Exelon Generation debt.
 
Exelon strives to achieve a generation portfolio having a zero-emission level. This addition of Deere’s wind assets will further aid the company in that direction. The company recently disclosed plans to invest $4.6 billion in its nuclear plants in Illinois, which will significantly lower the emission rate and also generate additional carbon-free power.
 
We consider Exelon’s decision to acquire the wind generation assets as a strategically significant move, given 29 states in the U.S. already have a renewable energy standard in place. As more states are likely to pass rules for emission-free generation, this acquisition gives the company a dominant position in the emission free generation arena.
 
Exelon currently retains a Zacks #3 Rank (short-term Hold rating). We presently maintain a Neutral rating on the stock.
 
Based in Chicago, Illinois, Exelon Corporation, through its subsidiaries, engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. It has access to more than 38,000 megawatts of electricity and generates electricity through nuclear, fossil and hydroelectric generation facilities.
 
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