This morning, our parent company, Pepco Holdings, Inc (PHI) announced the sale of power generation assets owned by our sister company, Conectiv Energy.  This is a major announcement and I hope to give everyone a clear picture of what happened…

Background

Before today’s announcement, Pepco was one of five companies owned by PHI.  Those companies were Atlantic City Electric (ACE), Delmarva Power (DPL), Pepco, Conectiv Energy, and Pepco Energy Services (PES).

ACE, DPL, and Pepco are regulated utilities responsible for the transmission and distribution of electricity in their respective service territories.  They don’t own generation plants or generate any electricity!  They’re only responsible for distributing it from various power plants to their customers.

Conectiv Energy is a competitive wholesale energy trading and generation company.  Located in the Mid-Atlantic States, the company generates and sells power in the PJM, New York and New England power pools.

Lastly, PES provides energy-saving and sustainable energy products and services to large commercial, institutional, industrial and government users.  For example, PES managed a large scale project to retrofit the roof of the Atlantic City Convention Center with solar panels.

What’s Happened & Why?

Today, Wednesday, April 21, 2010, PHI sold the generation assets owned by Conectiv Energy to Calpine Corporation.  Based in Houston, Texas, Calpine Corporation is a leading electric generation company with a sound environmental record.  Sold for $1.7 billion, the sale consisted of the Conectiv Energy power generation assets for $1.65 billion plus the value of the fuel inventory at closing, which was roughly $50 million.

The sale of Conectiv Energy’s generation assets was a business decision made to accomplish six goals:

• Reposition PHI as fundamentally a regulated utility company
• Improve business risk profile
• Reduce volatility of future earnings
• Reduced exposure to the energy commodity markets
• Lower capital and collateral requirements and
• Strengthen credit profile

The Calpine Corporation plans to continue operating all of the Conectiv Energy plants.  The sale does not include certain contracts and other assets that PHI expects to liquidate over the next 12 months.  As a result of this transaction, there will be a reduction of about 150 management positions.  PHI will offer severance and outplacement assistance to those affected employees!

For more information about this transaction, check out PHI’s Press Release & 8K Form

‘Til the next post,

Andre