On October 12, French utility Electricite de France SA (EDF) asked the Maryland Public Service Commission to reject Exelon Corp.‘s (NYSE: EXC) proposed $8 billion buyout of Constellation Energy Group Inc. (NYSE: CEG). EDF is currently Constellation Energy’s second largest stakeholder and partnered with Constellation in control of a nuclear power joint venture company, UniStar. Exelon and Constellation filed rebuttal testimony with the PSC that they said strengthens the companies’ commitments related to the proposed merger.
The merger proposal provides a direct investment in Maryland of more than $250 million, including a $100 rate credit for each Baltimore Gas and Electric (BGE) residential customer, investments in energy efficiency and renewable energy, and a new headquarters building in Baltimore, a statement from Exelon and Constellation said.
“We are confident that the proposed merger is good for BGE, its customers and the state of Maryland. Our proposal offers significant direct benefits to BGE’s customers. Now we have agreed to additional conditions proposed by the parties,” said Christopher M. Crane, president and COO of Exelon.
EDF, though, which bought half of Constellation’s nuclear power fleet in 2008 for about $4.5 billion, said the merger would have a “negative impact” on its relationship with Constellation. In October of last year, EDF and Constellation ended a separate joint venture, UniStar, to develop new U.S. nuclear power plants after Constellation pulled out of negotiations for a $7.5 billion federal loan guarantee to build a new 1,600 MW reactor at Calvert Cliffs in Maryland with EDF. Constellation said a required credit subsidy would force Constellation and its partner to pay the U.S. Treasury 11.6 percent, or $880 million, to obtain the loan guarantee. Faced with that potential expense, Constellation decided to pull out of the new-build venture.
EDF spokeswoman Kelly Sullivan said in a statement that “Based on our careful analysis of the terms of the merger, EDF has concluded that we cannot support it.”
EDF said the merger would give the combined company control over a generation fleet so large that EDF’s joint venture with Constellation, called Constellation Energy Nuclear Group, would be unable to expand in the mid-Atlantic electricity market “and possibly other markets,” according to testimony filed by Jeffrey Johnson, an energy consultant hired by EDF, according to the Wall Street Journal.
“EDF will be unharmed by the merger,” Exelon said in a statement, adding that “EDF’s approval is not required for the merger.”
In addition to the Maryland PSC, the companies need approval from the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission and the New York State Public Service Commission. They also plan to hold a shareholder vote on the proposed merger in November.
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