By Suzanne Herel

Exelon’s primary goal for 2016 is completing the acquisition of Pepco Holdings Inc., but the company has contingency plans in place if the D.C. Public Service Commission doesn’t rule by March 4, CEO Christopher Crane told analysts Wednesday.

Speaking during an earnings call, Crane said the company will abandon the merger and begin buying back the 57.5 million shares it issued for the $6.8 billion deal if regulators don’t act promptly.

“That’s our only commitment, to try this until March 4,” Crane said. “If we can’t get it by March 4, then we have to fold up and then start to execute on the debt reduction and the buyback of the equity issued.”

While the PSC indicated in its Oct. 28 order  that it expected to rule by March 4, a PSC spokeswoman said the commission is not obligated to act by then (case 1119).

“There is no requirement, statutory or otherwise, that obligates the commission to issue a decision within a certain number of days from the date the record closes in a commission case,” said spokeswoman Kellie Didigu. “It is a commission policy to issues a decision within 90 days on major cases, such as rate cases and the current merger proceeding. However, if necessary, the commission can take more time.”

The commission closed the record Dec. 23, making the 90-day mark late March. The commission will post a notice and an agenda 48 hours before an open meeting at which the commissioners will announce their decision, Didigu said.

Valuing Nuclear

Crane said another focus of 2016 will be advocating for the company’s nuclear fleet to be “properly valued for their clean, safe and reliable attributes.”

To that end, the company is supporting FERC-ordered reforms to MISO’s capacity market, especially regarding Zone 4. There, April’s capacity auction saw prices clearing at $150/MW-day, up to 40 times more than elsewhere in the RTO. (See MISO Files Changes to Capacity Rules; Seeks Adjustment on Import Limit.)

Exelon is also continuing to push Illinois legislators to adopt a plan to help shore up the finances of its Byron, Quad Cities and Clinton plants. (See What’s Next for Exelon’s Nukes, AEP Merchant Fleet?)

“We were successful and PJM was successful in the capacity market redesign. That gave some upside to the fleet in NiHub [Northern Indiana],” Crane said. “It greatly helped Byron and added help to Quad Cities.”

Still, he said, Quad Cities is struggling, and Clinton is in the red, he said.

As for the MISO reforms, Crane said, “We would like the design to be more like the PJM capacity market design.” But, he said, “That in itself will not save Clinton.”

In New York, Exelon’s Nine Mile Point and Ginna plants might be helped by a zero-emission credit program being developed at the direction of Gov. Andrew Cuomo.

“We still have quite a ways to go, but as a threshold political matter, having a governor of the prominence of Gov. Cuomo step forward and propose to compensate nuclear fairly to keep it in business is important,” said Joseph Dominguez, executive vice president for government and regulatory affairs. “If we get the details right, I would go so far as to say it’s kind of a watershed event for the industry.” (See New York Would Require Nuclear Power Mandate, Subsidy.)

Added Crane: “We’ve got a very supportive administration that recognizes the clean benefits of nuclear, and that’s really appreciated.”

Crane also announced during the earnings call that Exelon will be increasing its dividend by 2.5% each year for the next three years beginning in June, regardless of whether the PHI deal goes through.

Earnings

Exelon reported fourth-quarter earnings of $309 million ($0.33/share), compared with $18 million ($0.02/share) for the same quarter in 2014. Its revenue for the quarter was $6.7 billion, compared with $7.26 billion in 2014.

“Despite a challenging year for the sector, strong operating performance at both our utilities and our generation business enabled us to deliver strong earnings,” Crane said.

Exelon said fourth-quarter earnings were impacted by warm weather in the ComEd and PECO zones, increased nuclear outages, higher depreciation and amortization expenses for its generation business and the cost of funding the PHI transaction.

That was partially offset by higher earnings at Commonwealth Edison, and lower uncollectible accounts at PECO and Baltimore Gas and Electric.

Crane said the utilities experienced a record earning year. Net income for the full year was $2.27 billion ($2.54/share), compared with $1.62 billion ($1.88/share) for 2014. CFO Jack Thayer said the company is poised to invest $3.95 billion in capital across three utilities and an additional $1.38 billion at PHI.