Exelon's status as renewable power force teeters
A major California bankruptcy could lead the Chicago-based power giant to lose most of its wind farms—and a huge solar power ranch—thanks to a decision two years ago to mortgage them for hundreds of millions.
Exelon markets itself as the greenest of the country's major power generators. Much of that claim is based on the carbon-free nature of its nuclear power plants, the largest fleet in the nation, but it also stems from a substantial renewable power group, including more than 40 wind farms in 11 states.
Now a decision the Chicago-based energy giant made two years ago to pull hundreds of millions in cash out of those renewable assets while retaining operational control has put Exelon's continued ownership of at least 26 of those wind projects—and its status as a player in the renewable industry—in jeopardy. Also at risk are the bulk of Exelon's 521 megawatts in solar power projects around the country.
An improbable series of events has laid bare the risks Exelon took on in 2017 when it sold nearly half its ownership of the affected wind farms and solar projects to a large life insurer and then took on $850 million in debt on the assets. Effectively, the company mortgaged the businesses—identified in the Nov. 28, 2017, loan agreement, which Exelon filed with the Securities & Exchange Commission—for as much as it could pluck out of them.
The assets themselves were collateral for the bank loan, with cash flows from the businesses mainly used to pay off the debt. Given that all the projects had long-term contracts to sell their output at fixed prices, the loan seemed as safe as any like it reasonably could be.
STAYING IN CONTROL
When Exelon originally struck the renewables loan deal, CEO Chris Crane offered insights into the reasons. Asked May 3, 2017, why Exelon didn't just sell the assets, Crane said, "We're still committing to a clean portfolio. Being in the renewable business is still part of our strategy. At this point, maintaining the operational control, the maintenance of the facilities, is important for us for our investment."
When Exelon sold a 49 percent interest in most of its renewable assets to John Hancock Life Insurance, it was paid $400 million. It cleared another $785 million (after various costs) from the loan on the assets.
The wind farms, desert solar facility and a biomass generator in Georgia—all pledged as collateral for the loan—have the combined capacity to generate more than 1,500 megawatts, nearly equivalent to two nuclear reactors. Exelon's mortgaging of the projects was a clever strategy to monetize assets and maintain a brand image the company prizes.
Crane and company can only hope PG&E continues to buy from Antelope Valley. But if not, they have difficult decisions ahead, most likely involving laying out more cash to preserve Exelon's image as a clean-energy force or losing that status, forged over many years.
Moar
https://www.chicagobusiness.com/utilities/exelons-status-renewable-power-force-teeters