[USML Announce] Fwd: Exelon CEO Threatening to Divest ComEd

[Blocker, Mark B.]

Mark:
 
   TQ Stats are the official stats.  See Rule 11.1.  If TQ Stats makes a
change, so be it (and it will be reflected auotmatically); if not, you are
out of luck.
 
  -- Mark B.


  _____  

From: announce-bounces at usml.net [mailto:announce-bounces at usml.net] On Behalf
Of springkerb at aol.com
Sent: Monday, September 26, 2005 10:14 AM
To: announce at usml.net
Subject: Re: [USML Announce] Fwd: Exelon CEO Threatening to Divest ComEd


On a separate matter, Jarrod Washburn's two runs allowed on Saturday have
been changed from earned to unearned as a result of a subsequent scoring
change.  However, TQ Stats still shows them as earned.  Mark B.:  Can you
check on that for me?  (I wouldn't want you or the Brats to pass me in the
standings.)
 
Mark 
 
-----Original Message-----
From: JOHN FRUIT, USBANCORP ASSET MANA <JFRUIT1 at bloomberg.net>
To: ANNOUNCE at USML.NET
Sent: Mon, 26 Sep 2005 10:34:07 -0400
Subject: [USML Announce] Fwd: Exelon CEO Threatening to Divest ComEd


Good read for the Chicago lawyer-types among you....this is what you get
when 

your governor flunked out of Econ 101 (and when you appoint a consumer
advocate 

chieftain to a powerful state agency).

----- Original Message -----

From: ROGER PLATT, BANK OF AMERICA N.A.

At:  9/26  8:36



---- Original Msg from: FAITH KLAUS, BANC OF AMERICA SECU At:  9/26  8:35

---- Original Msg from: Faith N Klaus  <faith.n.klaus at bankofamerica.com
<mailto:faith.n.klaus%40bankofamerica.com> >



                    At:  9/26 22:31

Exelon CEO John Rowe is threatening to divst Commonwealth Edison if
regulators

set the utility's rates below the wholesale market power. See highlighted
area

below:





> ===========================================

> Power struggle

> Exelon CEO Rowe in face-off with Blago over profits and pricing in
electricity



> By Steve Daniels

> September 26, 2005

> Exelon Corp. CEO John W. Rowe holds a hot hand in the electric power
market,



but he'll have to wrestle his winnings away from Gov. Rod Blagojevich.

>

> Mr. Rowe staked Exelon's future on nuclear power plants, a move that
proved



prescient beginning nearly two years ago when rising natural gas prices
pushed

up the cost of electricity generated by natural gas-fired plants. The lower
cost

of nuclear plants positions Mr. Rowe to reap big profits when a freeze on

electric rates in Illinois expires two years from now.

>

> But Gov. Blagojevich is taking dramatic steps to stop him. Last month, the

governor all but ordered Illinois regulators to reject Exelon's proposal to
set

electric rates through an auction-based system expected to produce big price

hikes. And last week, he appointed consumer advocate and longtime Exelon

adversary Martin Cohen to chair the Illinois Commerce Commission, the state

agency that regulates utilities.



>

> Now it's Mr. Rowe's move. In the face-off with the governor, he holds
strong,

if controversial cards. The 60-year-old executive told Wall Street in August

that he'd consider selling Exelon's Illinois unit, Commonwealth Edison Co.,
if



regulators set the utility's rates below the wholesale market price of
power.

>

> "I'll divest it," he told the group.

>

> Mr. Rowe wasn't available last week to comment on the governor's latest
moves,

but ComEd President Frank Clark backed up his boss, saying ComEd would have
to

file for bankruptcy protection "in a matter of months" in 2007 if it were
forced

to buy power at market prices but couldn't pass those costs to its
customers.

Asking Exelon's nuclear power plants to subsidize the utility, which no
longer

owns any plants, would be unfair to the company's investors, he argues.



>

> "(Shareholders) are buying (Exelon stock) because they think we have
low-cost

generation capacity that can be sold into a market that's rising," Mr. Clark

says. "We cannot and will not deceive them."

>



> "I know Exelon would like to see ComEd perform like a high-growth
company," a

spokeswoman for the governor says. "But that approach is not good for
consumers.

And ComEd does have a responsibility to provide reliable electricity at

affordable rates."

>

> The dispute between Mr. Rowe and Gov. Blagojevich boils down to a fight
over

the benefits of the state's abundant, low-cost nuclear power. Gov.
Blagojevich,

a politician facing re-election next year, wants consumers to get those
benefits

in the form of lower electric rates. Mr. Rowe, chief executive of a publicly



traded company, has promised them to shareholders in the form of higher
profits.

>

> Mr. Rowe largely has pleased Exelon's investors since his hiring as CEO in

1998 after leading utilities in New England. Called Unicom at the time, the

company was better known for frequent power outages and a fleet of

underperforming nukes than as a consistent earnings generator.



>

> But Mr. Rowe - aligning himself with former Navy submariner Oliver D.
Kingsley

Jr., whom Mr. Rowe's predecessor had hired to turn around the ailing nukes -

believed the plants could be turned into a strategic advantage. With Mr.

Kingsley riding herd on the company's nuclear plant workforce and quickly

improving the plants' production, Mr. Rowe bet against conventional industry

wisdom that the future was with plants fueled by natural gas, touted in the
late

1990s as clean, plentiful and cheap.



>

> FAITH IN GAS

>

> Consumer groups and politicians believed the gas boosters. As part of the

state's 1997 deregulation law that cut ComEd rates 20% and froze them for a

decade, they agreed to allow ComEd to sell or spin off its power plants and

focus exclusively on delivering power.>



>

> That led to the sale of ComEd's coal-fired plants to a California company
in

1999 and the spinoff into a separate subsidiary of the nukes a year later.
The

upshot: The state's utility regulators no longer had jurisdiction over what
the

power plants could charge. The state's bet was that the market would keep
prices

low once the rate freeze expired.

>



> Through the early part of this decade, Mr. Rowe saw few signs his bet
would

pay off. Falling wholesale power prices actually meant ComEd customers were

paying more in their frozen rates than they would have in a market-priced

system. Investors were anxious that rates, and Exelon's profits, would fall
once

the freeze expired.

>

> PURCHASE FAILED

>



> Mr. Rowe two years ago attempted to package a proposed purchase of
troubled

Decatur-based utility Illinois Power Co. with a deal to raise rates by no
more

than 9% through 2010. House Speaker Michael Madigan, D-Chicago, shot down
the

bill, which had passed the state Senate.

>

> Almost immediately thereafter, natural gas prices began to rise, and power



prices along with them. A year after Mr. Rowe's offer was rejected, it was
clear

that a market-based system of setting rates beginning in 2007 would result
in an

increase well above 9%.

>

> Today, any market-based, post-freeze system of pricing electricity is
certain

to produce rate hikes of at least 16% in Illinois. Wall Street investment
firm

Sanford C. Bernstein estimates the auction means 42 cents per share to
Exelon,

or 11% of consensus 2007 earnings projections.

>



> But to collect, Mr. Rowe must be willing to counter the governor's seizure
of

power rates as a potent political issue with dramatic action of his own,
like

committing all the 2007 power from Exelon's nukes to outside buyers, selling

ComEd or allowing the utility to spin toward bankruptcy.

>



> There's not much talk of compromise in Mr. Rowe's statements so far. "We
don't

do this for theory," he told investors last month. "We do it for money."

>

> Wall Street cheers the tough talk. Kit Konolige, utility analyst with
Morgan

Stanley & Co. in New York, recently wrote: "Because ComEd is a relatively
small

part of Exelon, especially after the closing of the proposed merger with
(New

Jersey-based Public Service Enterprise Group Corp.) - less than 10% - we
believe

Exelon could earn about $4.50 to $5 (per share) in 2007, even if ComEd

contributed nothing."

>



> A spokesman for Mr. Madigan, one of Exelon's toughest critics, isn't fazed
by

the bankruptcy threat.

>

> "That's the power company's traditional message - my way or the highway,"
he



says, predicting no resolution of the dispute until next year.

>

> ?2005 by Crain Communications Inc.

>





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Sidley Austin Brown & Wood LLP mail server made the following annotations on 09/26/2005, 10:22:19 AM:
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