Exelon to buy Deere’s wind power unit

By Sheila McNulty in Houston

Published: September 1 2010 00:07 | Last updated: September 1 2010 00:07

Exelon, the US’s biggest nuclear generator, has announced it will buy John Deere Renewables for as much as $900m to gain a foothold in the wind power industry.

Exelon’s attempt to diversify underlines the lack of momentum in the US nuclear industry, despite support given by the Obama administration earlier this year.

Under the agreement, Exelon will acquire 735 megawatts of operating wind capacity for $860m. The deal provides for an additional $40m upon commencement of construction on 230 advanced development projects.

About 75 per cent of John Deere’s output was sold under long-term power purchase agreements. As part of the deal, Exelon can pursue 1,468MW of new wind projects in various stages of development, including the 230 in advanced stages. It has the option of not continuing with some of the projects.

The acquisition signals renewed interest in investment in the energy sector that has been damped for several years by uncertainty surrounding the economy and proposed energy legislation.

“Uncertainty really does stifle investment,’’ said Peter Robertson, independent senior advisor for oil & gas at Deloitte and former vice chairman of Chevron’s board. “All of these threats of pending changes add onto the uncertainty.”

While that uncertainty has not cleared, those who have stockpiled cash are keen to spend it and deals have gained momentum in recent months.

Exelon has long been a proponent of clean energy legislation and built up its nuclear portfolio as a low-carbon option. It says it is the least carbon-intensive of the large US electric utilities. This transaction marks its entry into owning and operating wind projects.

Exelon, with more than $17bn in annual revenues, will finance the transaction with debt from one of its subsidiaries, Exelon Generation.

It had been banking on nuclear as the US fuel of the future, given the momentum for carbon reduction in recent years. But as that momentum has slackened, nuclear’s renaissance in the US has faded.

In February, the Obama administration tried to spark interest in nuclear, announcing $8.3bn in loan guarantees to help Southern Co build two reactors in Burke, Georgia.

Southern was among four companies named last year as being considered to share $18.5bn in federal loan guarantees to build new nuclear power facilities after reticence about potential disasters meant no reactor had been built in the US in almost three decades.