Moody's lowers Exelon Generation to negative outlook after spinoff plans

Moody's changed its outlook on Exelon Generation Co. LLC to negative from stable after its planned spinoff by parent Exelon Corp.

Exelon on Feb. 24 revealed its plan to separate its regulated utility business and competitive generation business into two publicly traded companies to focus on core business strategies.

The rating agency affirmed all the ratings of both companies.

"Although Exelon has indicated that ExGen will be committed to an investment grade rating following the spin we will need to review the specifics of the newly independent company's capital structure, liquidity, and financial policy at the time of the spin to determine whether the organization's current credit quality and rating can be maintained," Moody's Vice President - Senior Credit Officer Toby Shea said in a Feb. 24 news release.

The rating agency believes that an independently and publicly traded generation business may not exhibit the same credit profile after the split. The spinoff is expected to occur in early 2022.

Exelon Generation's existing credit profile reflects low leverage of about 2.5x net debt to EBITDA and its fleet of 13 nuclear power plants is heavily exposed to wholesale market power prices. The fleet's performance was also exposed during the peak of the severe winter weather in the Electric Reliability Council Of Texas Inc. earlier in February. Exelon Generation operates three large gas-fired plants in ERCOT, and said Feb. 24 it is facing financial impacts up to $950 million due to market conditions during the cold spell.