The Federal Energy Regulatory Commission (FERC) on Thursday authorized the $4.5 billion purchase by EDF Development of nearly half of Constellation Energy’s nuclear generation and operations business.
The commission also approved the terms of an agreement that gives Constellation Energy the option, but not the obligation, to sell its ownership interests in various nonnuclear generating plants and certain associated jurisdictional assets to EDF Development at agreed prices aggregating up to $2 billion.
FERC found the transactions consistent with the public interest under the Federal Power Act: They will not adversely affect competition, rates, or regulation, and will not result in cross-subsidization of a non-utility associate company, or the pledge or encumbrance of utility assets for the benefit of an associate company that is inconsistent with the public interest.
EDF Development is a unit of Électricité de France—85% of which is owned by the government of France. That company is already the world’s largest nuclear plant operator, with 58 reactors. In September 2008, it won an $18.7 billion takeover bid for British Energy, the company that owns eight of the UK’s 10 nuclear power plants.
Constellation Energy owns more than 9,000 MW of generating capacity (PDF) in seven U.S. states, 61% of which is nuclear power. It also co-owns UniStar Nuclear Energy along with the EDF Group. Currently, UniStar has four nuclear projects under development: Calvert Cliffs Unit 3 in Maryland; Callaway Unit 2 in Fulton, Mo.; Bell Bend Unit 1 near Berwick, Pa.; and Nine Mile Point Unit 3 near Oswego, N.Y.
The acquisition deal developed from an unsolicited proposal from EDF to Constellation Energy last December. The Baltimore company’s board had earlier in 2008 approved an acquisition bid from MidAmerican Energy, the company whose majority owner is Warren Buffet’s Berkshire Hathaway.
Under the transactions contemplated by a master agreement, EDF Development will acquire a 49.99% ownership interest in Constellation Nuclear, provide a $1 billion up-front cash investment in Constellation Energy in the form of nonvoting, nonconvertible cumulative preferred stock, and provide Constellation Energy with additional liquidity support, if needed, of up to $2 billion through put options.
The closing of the sale of the ownership interest in Constellation Nuclear is expected in late 2009. The put options relating to Constellation Energy’s non-nuclear assets will remain in effect until the end of 2010.
Constellation Energy and EDF International, a unit of EDF Development formed to conduct international business, also executed an agreement that provides EDF International with the right to nominate one director to Constellation Energy’s board, expanding the board from 12 to 13 directors. EDF International owns 8.52% interest in Constellation Energy, acquired through open market stock purchases.