Deere & Co. announced Aug. 31 it would sell its wind energy business to Excelon Corp, an energy company, for $900 million. The initial evaluation if for $840,000, with Deere getting the remaining $40 million when construction begins on already planned projects.
It’s a move that could potentially be a sign of active merging and acquisition in the future for the power industry.
With energy prices slogged in the slow down of the economic recovery, the game is changing for energy providers. Deer’s massive wind energy farms have become quite a discount, putting energy companies like Excelon in an excellent position to bargain hunt. Low prices have made it a favorable market for those purchasing wind power capabilities.
The $900 million sale, including earn-out provisions, will result in an after-tax charge of about $25 million in its fourth quarter results, a charge not reflected on Deere’s fourth quarter earnings forecast of $375 million announced Aug. 18. Deere’s wind power division includes 36 completed projects in eight states with an operational capacity of 735 megawatts. The wind energy division can power nearly 184,000 homes.
“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,” said Samuel R. Allen, Deere chairman and CEO. “We have chosen to place the wind portfolio with Exelon in part due to its demonstrated leadership in the energy industry.”
Deere once sought control of the wind market as an extension of its farming business, as many wind projects were located in rural areas. Deere had reportedly invested $1 billion over the past several years into a number of wind energy projects. It will now focus on its agricultural projects.
The nation’s largest operator of nuclear power plants, Excelon is not new to power, but new to the wind business. The company has been a wholesaler marketer of wind energy in West Virginia, Pennsylvania, and Illinois, with good results. The company earned $2.7 billion in the past year.
Excelon’s purchase is one of many other recent acquisitions in the power industry. Companies are rapidly buying up power assets before the expected economic recovery causes prices to rise. Blackstone Group paid $542.7 million for Houston’s Dynergy Inc. In a deal that went three ways, Dynergy also sold four power plants for $1.36 billion in cash to NRG Energy, Inc.
