Exelon to Acquire ETC ProLiance - Analyst Blog

Exelon Corporation EXC has announced that it will acquire Indianapolis-based firm ETC ProLiance Energy (“ETC ProLiance”). The company has already signed an agreement with ETC ProLiance Energy. The transaction is expected to be concluded by the second quarter of 2014.

Energy marketing company ETC Marketing, Ltd.'s subsidiary ETC ProLiance supplies natural gas to the industrial and commercial customers. In addition, the firm provides power generators and utilities to more than 2,500 customer facilities.

Exelon continues with its acquisition strategy of purchasing assets having the same line of operations. ETC ProLiance is a major gas marketer in the Midwest and has significant presence in Indiana, Illinois, Iowa, Kentucky, Michigan, Missouri, Ohio and Tennessee.

We expect the current acquisition to be immediately accretive and will also enable Exelon to increase its customer base besides experiencing operational synergy. In addition, the transaction will help Exelon to reduce competition in the aforesaid states.

Post acquisition, ETC ProLiance will act as part of Exelon's subsidiary Constellation. Constellation is a retail supplier of power, natural gas and energy products and services for homes and businesses in the U.S. The transaction is likely to enhance Exelon's product offerings while strengthening its market penetration.

We believe inorganic expansion program in the past have helped Exelon to expand its operations. Exelon continues to enjoy the benefits from its merger with Constellation Energy, which boosted the company's position in terms of load and customer base. Exelon expects to gather $550 million annually from 2014 onwards from merger-related operations and maintenance synergies.

We note that Exelon continues to improve its cash position and exhibit its efficiency in terms of improving cash inflow through operating activities. For 2013, net cash flows provided by operating activities were $6.3 billion versus $6.1 billion in the year-ago comparable period. A strong financial position supports Exelon's systematic inorganic growth strategy.

Exelon currently has a Zacks Rank #1 (Strong Buy). Some other stocks looking equally good in the utilities industry include Public Service Enterprise Group Inc. PEG, American Electric Power Co., Inc. AEP and Avista Corp. AVA. While Public Service Enterprise holds a Zacks Rank #1 (Strong Buy), American Electric Power and Avista Corporation carries a Zacks Rank #2 (Buy).