Exelon, Constellation still feel the urge to merge

This past April, Exelon, one of the big-dog power utilities in the U.S., and Constellation Energy announced the desire to join forces. This week, the Public Utility Commission of Texas said they could---at least as far as Texas is concerned. So, one more hurdle jumped in the race to a 2012 merger completion. Despite both of them having generation located in the Lone Star State, it appears the Commission isn’t too concerned that a merger will give them a significant market advantage.

“We are pleased that the PUCT has approved our application,” said Exelon President and COO Christopher M. Crane. “This is a key step toward completing the merger, and we remain on track to do so in the first quarter of 2012.”

“Because Exelon and Constellation both operate in Texas, securing the PUCT’s approval was an important step in completing our merger,” said Constellation Chairman and CEO Mayo A. Shattuck III. “We will remain focused on obtaining the remaining federal and state regulatory approvals and seeing the merger through to completion.”

And Shattuck and Co. will have many more approvals to jump, including A-OKs from the Federal Regulatory Commission, the Nuclear Regulatory Commission, the Maryland Public Service Commission and the New York Public Service Commission. Plus, they’ve got to get a pat on the back from the shareholders, which they hope to do by the end of this year.

Exelon and Constellation are so dedicated to this merger prospect, that they’ve even created a singular go-to website to the subject: www.exelonconstellationmerger.com.

On that website, you can learn all about the “strategic fit” of the combined companies and the key benefits the merger will achieve. Among the highlights are: increased scale and financial strength (or a “bigger is better” philosophy), a use of “complementary businesses” to grow (once again that “bigger is better” philosophy), more spots across the U.S. (even more of that “bigger is better” philosophy that will have their fingers in 38 states, D.C. and a little bitty bit o’ Canada). “Bigger is better” also spills over into the “enhanced utility platform” discussion (where being the second largest regulated distributor of electric and gas” is super good for customers) and the “clean power” discussion (where those customers also benefit from all that bigness with lots of renewable options).

So, basically, what we’ve learned is: Bigger is better. Gotcha. (Anyone else having AT and T flashbacks?)

And, you know what? That philosophy may indeed be true for Constellation, which is having a bit of a bad time this year. They’ve already lowered their 2011 earnings forecast by a nickel a share because of nuclear issues. And they adjusted their April-June profit down by a dime a share to 76 cents. Shattuck noted that the merger would help them diversify, making the risk of gray areas like nuclear a little less, well, risky. So, perhaps hooking themselves onto the Exelon star can help.

Exelon, unlike Constellation, seems to be having a heck of a good 2011. They raised their range for adjusted operating earnings to $4.05 to $4.25 a share from the $3.90 to $4.25 range. They also revved up the second quarter generation income from last year by about $60 million, are working on their Texas acquisition of natural-gas fired Wolf Hollow and they’ve filed with FERC for the RITE line along the Indiana/Ohio border.

So, the Exelon/Constellation merger keeps chugging along and, so far, it appears that Exelon will remain on top and perhaps pull Constellation up with it. Perhaps bigger really is better.