Exelon Corp. plans to sell its three Maryland coal-fired power plants for $400 million to a subsidiary of private equity firm Riverstone Holdings LLC, the Chicago-based energy giant said Thursday.
Under the terms of the deal, buyer Raven Power Holdings LLC will maintain employment levels and offer pay and benefits comparable to those now received by the plants' 420 workers for at least two years.
Exelon was required by the U.S. Department of Justice, the Federal Energy Regulatory Commission, and the Maryland Public Service Commission to sell the three facilities — the Brandon Shores and H.A. Wagner plants in Anne Arundel County and the C.P. Crane plant in Baltimore County — by the end of the year as a condition of its $7.9 billion purchase of Baltimore-based Constellation Energy Group in March.
The company employs 160 workers at Brandon Shores, 110 at Wagner, 90 at Crane and 60 in support jobs.
"The sale of these plants marks another important milestone in meeting our merger commitments," Exelon CEO Christopher M. Crane said in a statement.
Exelon will run the plants until the sale is completed, Crane said. The sale, subject to approval by FERC and the Justice Department, is expected to be finalized in the last three months of the year.
Raven Power, a newly created portfolio company of New York-based Riverstone Holdings, will pay about $400 million for the plants, Exelon said. In a Securities and Exchange Commission filing Thursday, Exelon said the estimated total includes a base price and allows for adjustments based on the inventory on hand, working capital and capital expenditures at the time of closing.
The company said the sale was expected to generate about $205 million in cash tax benefits, mostly this year and next.
Earlier this year, some analysts anticipated a price in the $800 million to $900 million range, but they acknowledged the market was difficult given falling natural gas prices and stricter air-quality regulations to be imposed over the next few years.
The agreed-to price is less than what Exelon would have been able to get without the deadlines and limitations on potential buyers imposed by the merger agreement, the company said in the filing. Exelon agreed not to sell the plants to companies that already have large power-plant holdings in the region. In addition, some market participants did not bid, the filing said.
The price "captured strong value for the assets in a challenging auction process and market environment," said Paul Adams, an Exelon spokesman. "The transaction was influenced by multiple factors, including low power prices and demand, combined with a challenging commodity market environment for coal plants."
Exelon said it would record a pre-tax loss of roughly $275 million in the third quarter to reflect the difference between the estimated sale price and the carrying value of the plants.
Riverstone's co-founders, Pierre Lapeyre and David Leuschen, said in the Exelon statement that energy investors were attracted to the Maryland plants because of their experienced workforce and strong record of safe and environmentally sound operations.
The plants have undergone environmental upgrades since 2008. Constellation spent nearly $1 billion in 2010 on a pollution "scrubber" at Brandon Shores. The Pasadena facility, the largest of the three, is now considered one of the cleanest coal plants in the nation, Exelon said.
Riverstone, a private equity firm founded in 2000, invests in energy exploration and production, oil field services and power, and renewable energy.