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The CEO Power Forum: The Best of the Best
between ComEd and PECO.
Are you one company now?
I would not say that everything is done. I would say that two-thirds of the job is done. I think there is more saving to be done out of consolidating our supply chain. I think there are more savings to be made from operating the delivery businesses in PECO and ComEd more jointly. I think there are more savings to be made in IT. As I look over things, I think we have very well consolidated nuclear. I think we are very far in consolidating our fossil operations. We have made big progress in these areas, but we are not done yet.
What is the strategy going forward in terms of growth, and what assets would you think of purchasing to support that growth?
Our strategy is first to learn from both past successes and past failures and try to get the numbers right. We are absolutely committed that we will not grow unless we can do it in an accretive way. We, like other utilities, do not have room for big mistakes that produce losses. Frankly, in our business there is no strategy powerful enough to justify two to three years' dilution. Anything we do, we have to have high confidence that it will be accretive. That said, we do believe our industry will have opportunities. Our preference would be an integrated generation, transmission and distribution company in an area that has made the transition to competition. But like everybody else, we are keenly aware that there are some very depressed generation companies around, and if we thought the prices were low enough so the acquisition could be properly accretive, we would consider that too.
What kind of M&A would you be interested in?
The first criterion is accretion and second criterion is good return on investment, and beyond that, integrated utilities fit our strategy best. The reason we haven't done one is we haven't found somebody that fits our criteria who wants to do a deal with us.
Would you think of selling your transmission assets? Does that make sense to you?
We are ardently in favor of the creation of a super-RTO in the Northeast. We want to belong to PJM because it unites the two halves of our company and gives us maximum flexibility. So, we would love to see PJM and MISO integrated as much as possible. We would certainly consider selling our transmission assets if: a) that helped the Northeast market develop; b) it solved problems for FERC, and; c) the Senate passes the House bill that protects us from adverse tax consequences. So, there are three very important things going on, but I'm not sure that will come to pass.
When do you believe power markets will rebound?
In terms of power markets, we tend to see them recovered just a little already. We don't think you'll see substantial recoveries until the 2006-2007 time period, but we don't think it is as late as 2010. We believe that the economy will begin to improve if not