Market Overview

Fitch Affirms Ratings of Exelon Following Merger

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NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has affirmed the Issuer Default Ratings (IDR) and instrument ratings of Exelon Corp. (EXC) and each of its existing operating subsidiaries, including the newly acquired Baltimore Gas and Electric Co. (BG&E). The rating affirmations follow the closing of the merger between EXC and Constellation Energy Group, Inc. (CEG).

Fitch also upgraded the ratings of CEG's outstanding senior unsecured debt to 'BBB+' from 'BBB-' and junior subordinated notes to 'BBB-' from 'BB'. The CEG upgrade reflects the assumption of CEG's publicly traded debt and bank credit facility following an internal restructuring that includes an upstream merger of CEG with and into EXC. Consequently, EXC will be responsible for CEG's debt obligations. The restructuring is expected immediately after the merger. CEG's 'BBB-' long-term IDR, short-term 'F3' IDR and 'F3' commercial paper ratings are withdrawn. The Rating Outlook for all entities is Stable. See the full list of rating actions at the end of this release.

Rating Drivers

Financial position: Fitch expects EXC's post-merger consolidated financial position to remain solid and only moderately weaker than Fitch's previous expectation of EXC's standalone credit profile. On a pro forma basis as of Dec. 31, 2011, Fitch calculates EBITDA/interest and Debt/EBITDA of the combined entity were 6.7 times (x) and 2.6x, respectively. In 2012 those ratios are expected by Fitch to approximate 6.0x and 2.75x.

Risk Profile: EXC's post-merger business risk profile is unchanged, with regulated earnings contributing nearly half of projected 2012 EBITDA on either a standalone or a combined basis. Moreover, the addition of CEG's retail energy business should lower liquidity requirements. By matching EXC's long generation position and CEG's load-serving retail business, Fitch anticipates net margin postings will decline.

The addition of CEG's retail energy business complements the cash flow profile of EXC's wholesale generation business; high wholesale power prices result in wider margins and greater cash flow for the larger generation segment and compressed margins for the retail segment and vice versa.

The post-merger credit profile of EXC's wholesale generation subsidiary, Exelon Generation Company, LLC (Exgen), is expected by Fitch to remain strong. Including the debt to be assumed by EXC, which Fitch expects will ultimately be refinanced at Exgen, debt and leverage measures will weaken from historical levels, but remain supportive of the existing ratings due to the headroom provided by Exgen's currently low leverage and strong interest coverage measures.

Going forward, Exgen's credit measures will be pressured by Fitch's expectation that power prices will remain low for the next several years and by a large capital spending program. A significant portion of the planned expenditures are discretionary. Ultimately, credit quality measures and ratings will depend on the level of capital investment and financing plan. Fitch expects a portion of the proceeds from asset sales required by the Federal Energy Regulatory Commission (FERC) as a condition of the merger will be applied to debt reduction.

The ratings of regulated subsidiaries Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company are unaffected by the proposed merger.

The combined company will have increased scale, with approximately 34,390 megawatts (MWs) of generating capacity (of which 18,967 MWs would be nuclear), three regulated electric utilities serving 7.8 million customers in three states (Illinois, Pennsylvania and Maryland,)and a national footprint serving retail and wholesale load.

Fitch has upgraded the following ratings with a Stable Outlook:

Constellation Energy Group

--Senior unsecured debt to 'BBB+' from 'BBB-';

--Junior subordinated notes to 'BBB-' from 'BB'.

Fitch has affirmed the following ratings with a Stable Outlook:

Exelon Corp.

--IDR at 'BBB+';

--Senior unsecured debt at 'BBB+';

--Commercial paper at 'F2';

--Short-term IDR at 'F2'.

Exelon Generation Co., LLC

--IDR at 'BBB+';

--Senior unsecured debt at 'BBB+';

--Commercial paper at 'F2';

--Short-term IDR at 'F2'.

Commonwealth Edison Company

--IDR at 'BBB-;

--First mortgage bonds at 'BBB+';

--Senior unsecured debt at 'BBB';

--Preferred stock to at 'BB+';

--Short-term IDR at 'F3';

--Commercial paper at 'F3'.

ComEd Financing Trust III

--Preferred stock at 'BB+'.

PECO Energy Co.

--IDR at 'BBB+';

--First mortgage bonds at 'A';

--Secured pollution control bonds at 'A';

--Senior unsecured debt at 'A-';

--Preferred stock at 'BBB';

--Commercial paper 'F2';

--Short-term IDR at 'F2'.

PECO Energy Capital Trust III

--Preferred stock at 'BBB'.

PECO Energy Capital Trust IV

--Preferred stock at 'BBB'.

Baltimore Gas and Electric Company

--IDR at 'BBB;

--First mortgage bonds at 'A-';

--Senior unsecured debt at 'BBB+';

--Pollution control bonds at 'BBB+';

--Preferred stock to at 'BBB-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2'.

BGE Capital Trust II

--Preferred stock at 'BBB'.

Fitch has withdrawn the following ratings:

Constellation Energy Group

--IDR of 'BBB-';

--Commercial paper rating of 'F3';

--Short-term IDR of 'F3'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Parent and Subsidiary Rating Linkage' (Aug. 12, 2011)

--'Recovery Ratings and Notching Criteria for Utilities' (Aug. 12, 2011);

--'Rating North American Utilities, Power, Gas and Water Companies' (May 16, 2011).

Applicable Criteria and Related Research:

Rating North American Utilities, Power, Gas, and Water Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=625129

Recovery Ratings and Notching Criteria for Utilities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648449

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch Ratings
Primary Analyst
Robert Hornick, +1-212-908-0523
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Shalini Mahajan, +1-212-908-0351
Director
or
Committee Chairperson
Glen Grabelsky, +1-212-908-0577
Managing Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

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