Constellation is based in Maryland and owns Baltimore Gas & Electric.
In this Intelligence Report: The incentives package that Exelon is offering up make the deal work.
Even in a multi-billion dollar corporate deal there is no such thing as a free lunch; it's just a matter of who is paying. The Exelon-Constellation merger is a stock deal. Now though, even as utility executives in Chicago and Baltimore toast the success of their sale and acquisition, there will be perks and incentives paid by Exelon to insure that state and federal regulatory agencies approve the deal.
Exelon will keep its name and its headquarters in Chicago. The merger that will put ComEd and constellation together in an ever larger energy conglomerate is expected to be complete in early 2012.
However, it will need the approval of agencies thadesignt have turned down several similar Exelon purchase plans in the past.
This time, Exelon Chairman and CEO John Rowe isn't taking any chances.
"I wouldn't do this, and I would be recommending it to the boards and regulators and all of you, if I did not believe this is a very special combination that Chris and Mayo have and will run it well together and make it sing for all of you," said Rowe.
In a plan aimed at making regulators in Maryland happy, the Chicago firm will pay into numerous special projects:
- $4 million to support Maryland's energy efficiency act,
- $5 million for the state's universal service program,
- $10 million to help spur development of Maryland's electric vehicle infrastructure,
- $10 million/year to local charities for 10 years,
- more than $50 million to develop renewable energy in Maryland, and a $100 credit per customer credit paid to each of the hundreds of thousands of Baltimore Gas & Electric residential customers.
Total incentives: more than $250 million.
Finally, the new company pledges to expand the commercial and renewable energy headquarters that will stay in Baltimore, and build or substantially renovate a design center in Baltimore.
"We're maintaining a significant headquarters and employee presence here in Baltimore, as will both company's renewable businesses," said Mayo Shattuck, Constellation chairman and CEO.
ComEd is currently in front of the Illinois Commerce Commission asking for a $326 million rate increase to be paid by its electricity customers.
The I-Team asked an Exelon spokesperson Thursday night whether customers will eventually pay for the merger deal to work and whether the requested rate increase is part of the plan. A statement from a utility executive said: "Exelon shareholders, not customers, will pay for this transaction. No customer dollars will be used to finance it. ComEd is a regulated utility and is not subsidized by Exelon; its rates and returns are determined by the ICC."