Exelon Expects More Consolidation in Retail Market

"I think we're going to continue to see consolidation in the retail market; we'll have an opportunity to capitalize on that" Joe Nigro, Chief Executive Officer of Constellation, said during an Exelon analyst day.

"We're not in the business of looking at acquiring platforms in retail, we have the most substantial platform in the business; we're interested in the book of customers," added Ken Cornew, President & Chief Executive Officer of Exelon Generation

Cornew said the acquisition of books, versus entire platforms, was one reason for what an analyst questioned as low acquisition prices for certain recent retail acquisitions, as compared to the value touted by the buyers in such acquisitions.

An analyst had noted that Constellation's purchase price for the ConEdison Solutions retail supply business, $53 million (first reported by EnergyChoiceMatters.com yesterday) was exceeded by Constellation's assumption of ConEdison Solutions working capital under the deal (about $130 million).

Nigro also said that the analyst's referenced purchase prices may not reflect the full value of the underlying retail businesses as sellers seek a quick exit of non-core assets, and sellers do not have the generation assets to execute a generation-to-load matching strategy (as Constellation uses) that unlocks the value of the businesses.

Nigro also said that in the ConEdison Solutions retail acquisition, Constellation is acquiring 350,000 customers and 18 TWh of load. Notably, that customer count differs from the 560,000 customers referenced by Constellation at the announcement of the purchase; it was unclear if the difference was due to counting conventions (meters versus actual customers, though the term customer was used in both instances), or if the 350,000 excludes opt-out aggregation customers served by ConEdison Solutions

Nigro said that the retail market has seen margins stabilize since the polar vortex, and expects that trend to continue. Nigro sees stable margins continuing given that, in the wake of the polar vortex, some of the more "aggressive" players have passed on to other things or have become less aggressive in selling retail contracts. Nigro also said that the polar vortex's volatility remains, "fresh in people's minds," and retail suppliers remember how bad they were hurt, and that has led suppliers to price accordingly and to act in a more disciplined manner.