Exelon To Cease Operations Of 2 Illinois-Based Nuclear Plants

Exelon Corporation (NYSE:EXC) , a leading competitive power generator in the U.S., has decided to shut down the Clinton and Quad Cities nuclear power plants due to the lack of progress on the Next Generation Energy Plan (“NGEP”) legislation. During the 2009–2015 time frame, the two power plants incurred cash flow losses of more than $800 million on a pre-tax basis, even though they were two of Exelon’s best-performing plants. Thus, in the absence of adequate legislations to bring the plants back to profitability, the company had to resort to shutting them down so as to reduce losses.

The Clinton Power Station will close on Jun1, 2017, while the Quad Cities Generating Station will be shut down a year later on Jun1, 2018.

Exelon will submit permanent shutdown notifications to the U.S. Nuclear Regulatory Commission within the next 30 days. It will also cease capital investment projects for the long-term operation of the two plants. In addition, the company will stop fuel purchases and outage planning for the plants. Shutting down theseplants will result in one-time charges of $150–$200 million for 2016.

According to a state report, closing the Clinton and Quad Cities plants will increase wholesale energy costs in the region by $439–$645 million annually. The report also stated that keeping the plants operational would help the company to avoid $10 billion in economic damages related to higher carbon emissions over 10 years.

In addition to the challenges in the electricity market, costs of operating nuclear plants have been on the rise. In spite of the safety initiatives adopted at nuclear plants, potential accidents remain a concern. Insurances do not always cover all expenses related to accidents either. In case of a major accident, the company has to bear the whole expenses alone, which puts its margin under pressure.

In a similar move, another energy company, Entergy Corporation (NYSE:ETR) announced that it will cease operations of its Massachusetts-based Pilgrim plant by May 2019.

Zacks Rank & Key Picks

Currently, Exelon Corporation carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the same space are Spark Energy, Inc. (NASDAQ:SPKE) and Avangrid, Inc. (NYSE:AGR) . Spark Energy sports a Zacks Rank #1 (Strong Buy), while Avangrid holds a Zacks Rank #2 (Buy).