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Exelon Shops Power Plant as Non-Core Asset

Stocks in this article: EXC POM

NEW YORK (The Deal) -- Exelon (EXC), the Chicago, Ill.-based electric utility, has retained Morgan Stanley as its exclusive financial adviser for the sale of its 550 megawatt Quail Run natural gas-fired power plant in Odessa, Tex., according to three people familiar with the matter.

At Morgan Stanley, Scott Beicke, executive director, and Craig Edgar, managing director, are running the process. Calls to Beicke and Edgar were not returned and Exelon declined to comment.

The utility behemoth, with a $51 billion enterprise value, is selling the facility as it is non-core to its portfolio, one industry source said. Exelon is one of the largest competitive U.S. power generators, with approximately 35,000 MW of owned capacity, according to the company's website.

Even before it announced it was acquiring Pepco Holdings (POM) for $6.8 billion at the end of April, the company was already evaluating its non-core assets, this person said.

The company sent out teasers to prospective buyers last month and the auction will be conducted in a typical two-phase process, a second source said. The first person added that private equity players are the likely buyers of the asset, the first source said.

Exelon had invested $17 million in Quail Run from 2011 to 2013 for maintenance, said the second person.

The units at Quail Run are natural gas-fueled combined-cycle turbines. The facility operates in the western zone of the Electric Reliability Council of Texas, or ERCOT, and interconnects with Oncor Corp.'s 345 kilovolt system, according to the second source.

Phase 1 of Quail Run went into commercial operation in May 2007 with Phase 2 following in May 2008. Quail Run joined Exelon's power fleet in 2012 through Exelon's $7.9 billion acquisition of Constellation Energy Group Inc.

In December 2010, Constellation had struck a deal with High Plains Diversified Energy Corp. to sell the plant, but it ended up terminating the deal on June 6, 2011.

Constellation originally acquired Quail Run, along with another gas-fired power plant in April 2010 from Houston, Tex.-based Navasota Energy Services LLC for $365 million.

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