As if it's not enough that Exelon Corp.'s Peco Energy customers in much of suburban Philadelphia face another day without electric power:
Exelon shares hit a seven-year low of $33.50 this morning after the Chicago-based company and other utilities warned it might cut its dividend payments to investors.
Shares of the Chicago-based owner of Peco Energy and other utilities fell more than $1 in early trading today, following yesterday's $2.20 drop. Shares had topped $90 in 2008 but fell as power demand declined in the recession.
The latest drop follows yesterday's admission by chief executive Christopher Crane, after reporting disappointing third-quarter profits, that "revisiting our dividend policy will be in the range of options" if power prices don't rise soon. Crane said he would cut costs to shore up Exelon's credit rating, ensuring it can keep borrowing money cheaply, even if that means deferring digital system upgrades at nuclear power plants, cutting the dividend, and other expense savings.
The timing of Crane's disclosure, as utillities are struggling to fix storm damage, doesn't help Exelon's reputation, Robert Costello, who runs $55 million asset Costello Asset Management in Huntingdon Valley, told me. He noted that many utility stockholders are senior citizens and conservative funds who count on dividends to accrue even when stock prices are weak.
Aren't energy prices and stocks down all over? Sure, it's a cyclical business, said Costello -- but he noted that other utilities like Pepco, which owns Atlantic Electric, haven't cut their dividends. He blamed Exelon's $7.7 billion acquisition of Baltimore-based Constellation Energy last year, which, in a time of falling energy demand and prices, was likely to create a fiscal squeeze. (Corrected)