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FirstEnergy Solutions Finds Buyer For Retail Book (Buyer, Price Disclosed)

Agreement Is Stalking Horse, Opportunity For Other Bidders

July 10, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Note: This story was first published the evening of July 10 with an alert to our email subscribers

On July 9, 2018, Exelon Generation Company, LLC (Generation) entered into an Asset Purchase Agreement with FirstEnergy Solutions Corporation (FES) under which FES assigns all of its retail electricity and wholesale load serving contracts and certain other related commodity contracts to Exelon Generation (Constellation) for an all cash purchase price of $140 million, subject to certain purchase price adjustments.

The agreement with Exelon Generation is a "stalking horse" agreement, with an opportunity for other potential bidders, with the sale to be accomplished pursuant to a court-supervised Section 363 bankruptcy auction process. FES has filed a motion with the Bankruptcy Court overseeing its chapter 11 cases for approval of auction and bid procedures that will permit other interested parties to submit competitive bids for the retail and wholesale load serving business.

FES has approximately 900,000 Commercial & Industrial and Residential customers in six states in the Midwest and Mid-Atlantic, primarily Ohio and Pennsylvania and serves 41 terawatt-hours of electricity load.

Pursuant to the Purchase Agreement, Exelon Generation has agreed to use its commercially reasonable efforts to replace the guarantees and other credit support currently being provided by FES in support of the ongoing competitive retail businesses and to reimburse FES for any payments arising pursuant to such arrangements continuing for any post-closing period.

The transaction with Constellation does not include the transfer of (i) FES cash collateral posted with various counterparties or (ii) FES working capital. In total, FES expects to realize total cash proceeds of approximately $280 million, subject to certain purchase price adjustments, including the return of cash collateral and collection of retained net working capital.

"This agreement would provide an opportunity to grow our retail business in strategically attractive markets where we're best suited to match load served with Exelon generation assets," said Mark Huston, President of Constellation's National Retail Business. "FirstEnergy Solutions has a reputation for delivering value to customers, and our combined business would continue that tradition with a broad array of energy products and services at competitive prices."

The transaction is expected to close in the fourth quarter of 2018. The closing of the transaction is subject to certain conditions, including Generation being the winning bidder after a court-supervised Section 363 bankruptcy auction, the approval of the Purchase Agreement by the United States Bankruptcy Court for the Northern District of Ohio following the auction, and expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Either party may terminate the Purchase Agreement if the transaction has not been consummated by December 31, 2018. The Purchase Agreement also includes various representations, warranties, covenants, indemnification and other provisions customary for a transaction of this nature.

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