Deere & Co. will sell its wind energy business to a subsidiary of Exelon Corp. — marking Exelon’s entry into the ownership and operational side of wind projects and Deere’s departure.
The Moline equipment maker said Tuesday that it will sell John Deere Renewables to Exelon Generation Co. in a transaction valued at $900 million. It marks the largest transaction in Deere’s history.
“As Deere sharpens its own strategic focus, we have concluded that the company’s resources are best invested in growing our core equipment businesses around the world,” Deere chairman and chief executive officer Samuel Allen said in a news release. “We have chosen to place the wind portfolio with Exelon, in part, due to its demonstrated leadership in the energy industry.”
Deere’s largest previous transaction had been its $600 million purchase of Timberjack from Metso Corp. of Finland in 2000. Its second-largest transaction had been the sale of John Deere Health Care to UnitedHealthcare of Minneapolis, Minn., in 2006, for $500 million.
The deal will add 735 operating megawatts of clean, renewable energy to Exelon’s generation portfolio as well as an additional 230 megawatts in advanced stages of development. John Deere Renewables includes 36 completed wind projects in eight states as well as numerous projects in development.
Deere entered the wind energy business in 2005 and has been in the business of developing, financing, constructing and owning new wind energy projects. The company has invested under $1 billion in the business over the past five years.
“Deere has been interested throughout its history in the development of rural economies,” Deere spokesman Ken Golden said. “That led us to start the business in wind energy, which helped farmers and rural economies gain incomes from the wind that was blowing across their land.”
The projects are located in Illinois, Minnesota, Michigan, Kansas, Missouri, Texas, Idaho and Oregon.
Deere first announced in February that it was considering options for John Deere Renewables, including a possible sale. At the time, the company indicated that “wind energy is a sound industry and an important industry, but not one that Deere should be involved in,” Golden said.
In its own news release, Exelon Corp. said the initial acquisition is valued at $860 million. Deere will receive the remaining $40 million when construction is completed on the other advanced development projects.
Exelon said the acquisition builds on its commitment to renewable energy. Through its business and environmental strategy, known as Exelon 2020, the company plans to eliminate the equivalent of its 2001 carbon footprint. The Chicago-based energy company is the nation’s largest operator of nuclear power plants, including Exelon Nuclear’s Quad-Cities Generating Station in Cordova, Ill.
The company said it already is the least carbon-intensive of the large U.S. electric utilities.
But owning and operating wind projects is new to Exelon, which up to now has been a wholesale marketer of wind energy in Illinois, Pennsylvania and West Virginia.
John Rowe, Exelon chairman and CEO, said the acquisition is another way for Exelon to implement a “clean energy future.”
“Whether harmful emissions are priced or regulated, our combined capacity of nearly 19,000 megawatts of zero-emission wind, solar, hydro, landfill gas and nuclear power remains a clear competitive advantage that will only become more valuable,” he said in a news release.
According to Exelon, John Deere Renewables has enough installed and operating wind capacity to power 160,000 to 220,000 households. As part of the agreement, Exelon has the opportunity to pursue 1,468 megawatts of new wind projects in various stages of development, including the 230 megawatts in advanced stages.
“We expect to see increasing demand for clean, efficient wind power at a national level and in the 29 states that already have a renewable energy standard,” Rowe added. “This acquisition gives Exelon a strong position in the wind generation business that adds diversity to our generation fleet and provides more options for future growth.”
Exelon expects the acquisition to add to earnings in 2012 and to cash flows in 2013. The transaction is being funded by Exelon Generation debt.
Deere said the sale will result in an after-tax charge of about $25 million in its fourth quarter. The charge was not reflected in Deere’s fourth quarter earnings forecast of $375 million announced last month.
On news of the transaction, Deere stock closed up 29 cents to $63.27 in trading Tuesday. Exelon’s stock closed up 20 cents at $40.72.
Deere said the deal is expected to close later this year.