Electric utility Exelon Corp said it will buy Deere & Co's wind power business for about $860 million, expanding its portfolio of carbon-free electricity generation.

Exelon, the largest U.S. nuclear power operator, said the acquisition of John Deere Renewables will add 735 operating megawatts (MW) of clean energy to its portfolio, which currently includes about 1,000 MW of renewable power.

The deal includes a provision for an additional payment of $40 million for construction on 230 MW of wind power capacity in advanced stages of development.

The Deere wind farms -- 36 projects in eight states -- have an operating capacity large enough to power 160,000 to 220,000 households.

Deere, the world's largest maker of tractors and havesters, said in February it was considering selling the businesses, which was an outgrowth of its credit business that helps farmers and other customers finance purchases of its equipment.

Deere said the deal with Exelon would result in a fourth-quarter after-tax charge of about $25 million.

The purchase is part of the utility's Exelon 2020 program to reduce more than 15 million metric tons of greenhouse gas (GHG) emissions by the end of the next decade.

The United States currently has no legislation restricting carbon emissions, the gas blamed for contributing to global warming. A proposal that would have introduced emission limits on a national level was scuttled in the U.S. Congress earlier this year.

Still, companies such as Exelon, which owns the utilities ComEd in Illinois and PECO in Pennsylvania, and NextEra Energy, owner of Florida's largest utility and the nation's biggest renewable power company, expect carbon restrictions will ultimately be passed and benefit their power generation units.

At the end of 2009, the United States had about 35,000 MW of installed wind capacity, enough to power 9.7 million typical American homes, according to data from the American Wind Energy Association.

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, Exelon Chief Executive John Rowe said in a statement.

About 75 percent of Deere's wind power portfolio is already sold under long-term power purchase arrangements.

The deal is expected to contribute to Exelon earnings in 2012 and to cash flow in 2013.

As part of the acquisition, Exelon may also pursue 1,468 MW of new wind projects that are in various stages of development, including the 230 MW in advanced stages of development.

Barclays Capital acted as financial adviser to Exelon.

(Reporting by Matt Daily, additional reporting by Adveith Nair in Bangalore; Editing by Gopakumar Warrier and John Wallace)

Energy