Chicago-based power provider Exelon’s adjusted income and diluted earnings per share dipped in the first quarter, which the company capped off by completing its acquisition of the James A. FitzPatrick Nuclear Power Plant in New York state.
Net income, on a non-generally accepted accounting principles (GAAP) basis, fell from $632 million in first-quarter 2016 to $605 million in the same three-month stretch of this year. Diluted earnings per share were knocked from $0.68 to $0.65.
In a press release, the company attributed the lower numbers to issues with its Exelon Generation subsidiary: declining natural gas prices, a higher number of outage days at its nuclear power sites (103 vs. 80 a year ago), and reduced capacity prices and realized energy prices.
The GAAP results were much stronger: $995 million in quarterly net income, up from $173 million a year ago; and $1.07 in diluted earnings per share, up from $0.19 in first-quarter 2016.
Exelon cited the $293 million purchase of Entergy’s FitzPatrick plant on March 31 at the top of its list of quarterly highlights. Entergy had planned to close the 41-year-old facility in January of this year, but Exelon agreed to buy the plant after the state approved an energy subsidy program expected to pay upstate nuclear power providers roughly $8 billion over its lifetime.
The price included $110 million in cash and $183 million in net cost reimbursements for Entergy, according to Exelon’s earnings statement. Specifically, Exelon Generation delivered nuclear fuel and reimbursed Entergy for expenses connected with a refueling outage at FitzPatrick, along with reimbursement for operations and maintenance costs until the deal was done. “These reimbursements covered costs that Entergy would have avoided had it shut down the plant as originally intended in January 2017,” the release says.
Exelon Generation also reaped a $226 million after-tax bargain purchase gain from the deal, which made it the sole provider of nuclear power in upstate New York.
The New York zero emissions credits (ZEC) program took effect on April 1, so contributions for FitzPatrick and Exelon’s other regional nuclear plants will show up in the earnings results for the second quarter, Jonathan Thayer, Exelon’s chief financial officer, said during the company’s earnings call on Wednesday.
Meanwhile, similar legislation in Illinois is due to take effect on June 1, with the intent of preventing Exelon’s planned closures of its Clinton Power Station and the Quad Cities Nuclear Power Station.
Both states’ nuclear subsidies face legal challenges, led by the Electric Power Supply Association, arguing that the programs intrude on the authority of the Federal Energy Regulatory Commission over “the sale of electric energy at wholesale in interstate commerce.” Exelon CEO Christopher Crane expressed optimism that the subsidies would survive.
“We don’t expect the actual ZEC procurement process in Illinois to conclude until later in the fall [but] we remain confident that the ZEC programs will be upheld in the courts to the benefit of the state, the communities and these valuable resources,” he told analysts.
Credits in Illinois would be retroactive to June 1.
