The Exelon-PSEG Super Merger: A Nuclear Liability?

Deck: 

Experts debate the risks of a proposed acquisition that would increase the largest nuclear fleet in the country.

Fortnightly Magazine - February 2005
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Even as many energy and financial experts are touting the so-called "synergies" of the proposed merger between Exelon and PSEG, some are growing concerned over one of the deal's chief selling points: the high concentration of nuclear power.

In fact, prior to the merger, Exelon's nuclear generation was equivalent to 37 percent of all nuclear generation in unregulated states from 2001-2003-and over this period nuclear generation accounted for 88 percent of the company's total power output. No company, in other words, offers as pure a play on the economic potential of nuclear generation in the United States as does Exelon, noted Sanford C. Bernstein & Co equity analyst Hugh Wynne, in a report.

The combined entity formed from Exelon and PSEG would have combined generation assets of 52,000 MW, including some 20,000 MW of low-cost nuclear capacity. On December 20, at a press conference announcing the deal, company executives noted several times how Exelon's top-quartile performance in the management of nuclear facilities would bring cost savings and performance advantages to PSEG's nuclear operation. The Exelon-PSEG group expects cost reductions to make up 85 percent of the anticipated savings from the merger, with increased output from PSEG's nuclear fleet accounting for another 15 percent. Moreover, an executive familiar with the deal says nuclear synergies makes up nearly one-third of the overall savings.

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