Energy utility Exelon Corporation (EXC) announced that its unit Exelon Generation issued $900 million notes in two tranches. The unit of Exelon will utilize the net proceeds to pay a portion of the purchase price for its pending acquisition of John Deere Renewable, LLC, and for general corporate purposes.
One offering comprises $550 million of 4.00% notes due October 1, 2020, at an offer price of $99.894 (per $100.00 principal) to yield 4.013% when held to maturity. The second offering constitutes $350 million of 5.75% senior notes due October 1, 2041, at an offer price of $99.598 (per $100.00 principal) to yield 5.778%.
Exelon’s total long-term debt (including long-term debt owed to financing trusts) at the end of second-quarter 2010 was $11.2 billion, but with the issue of new notes the long-term debt will reach $12.1 billion. The debt-to-capital ratio of Exelon at the end of second-quarter 2010 was 47.9%. The current issue of the new series would inflate the debt-to-equity ratio by 180 basis points, climbing up to 49.7%.
Total interest expenses of the company would also go up by $40.1 million annually due to this note issuance. Interest expenses were $269.0 million at the end of second-quarter 2010 versus $159 million at the end of second-quarter 2009.
Exelon Generation ended the second quarter 2010 with total revenue of $2,353 million versus $2,378 million at the end of second-quarter 2009. The adjusted earnings of Exelon Corporation at the end of second-quarter 2010 were 99 cents per share compared with $1.03 per share in the year-ago comparable period.
The company expects earnings for 2010 to range between $3.70 and $4.00 per share. The Zacks Consensus Estimates for third quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are $1.06 per share, $3.94 per share and $4.10 per share, respectively.
Exelon currently retains a Zacks #3 Rank (short-term Hold rating). The positive catalysts for the company are its well-managed nuclear generation fleet and high-return merchant energy segment. However, erratic weather pattern in its service territories and pending rate cases prompt us to maintain a Neutral rating on the stock.
Based in Chicago, IL, 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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