- The Washington Times - Thursday, December 15, 2005

FPL Group Inc.’s proposed purchase of Constellation Energy Group, parent company of Baltimore Gas and Electric, would create a utility company stretching from Florida to Maine.

The combined company would have $22 billion in annual revenue and more than 5 million customers along the East Coast.

The Florida utility, which owns Florida Power & Light, could pay as much as $11 billion for Constellation — the only Fortune 500 company remaining in Baltimore.

Both utilities yesterday declined to talk about the proposed merger, first reported in the New York Times yesterday, but analysts endorsed such a deal and shares of Constellation soared.

The Baltimore company’s shares closed on the New York Stock Exchange at $61.10, up $4.83, or 9 percent. FPL stock rose 13 cents to $43 yesterday.

“I think it’s going to be a really good thing,” said Michael Worms, an analyst at New York investment bank Harris Nesbitt Corp.

The deal would greatly diversify the Florida company. FPL derives 90 percent of revenue from Florida Power & Light, which has 4.2 million customers in 26 states.

Constellation’s BGE has 1.1 million electricity customers and 600,000 gas customers. Constellation also is an energy generator, with 10 power plants that can produce 12,000 megawatts of energy, and a power marketer, acting as an independent middleman buying and selling electricity on the wholesale market.

The Baltimore company also owns three nuclear power plants.

Constellation reported $12.5 billion in revenue in 2004, and FPL has $10 billion in revenue.

Maryland regulators and consumer advocates said FPL’s purchase of Constellation would raise questions because of concerns over Florida Power & Light’s reliability.

The utility has come under scrutiny for failing to quickly restore service after hurricanes walloped the state, said Theresa Czarski, an attorney at the Maryland People’s Counsel, the independent agency representing Maryland utility customers.

“Florida Power and Light doesn’t have the best reputation, even among its own customers,” she said.

Hurricane Wilma, which struck Florida Oct. 24, cut electricity to 3.2 million Florida Power & Light customers, some of whom were in the dark for more than two weeks.

Ms. Czarski said it is not clear whether a merger would result in lower rates for consumers.

The company has passed on to consumers this year higher fuel costs and some of the cost of recovering from several hurricanes. Some critics have said FPL shareholders should eat more of the company’s costs instead of always passing them on to customers.

“Florida ratepayers are paying out the nose for hurricane cost recovery, for fuel cost recovery, supposedly because FPL cannot afford to pay for these costs themselves,” said David Bruns, a spokesman in Florida for the senior lobby AARP. “Somehow they can afford to pay $11 billion for another company? This is outrageous.”

The Maryland Public Service Commission, which oversees utilities, said any deal would be reviewed to ensure a merger would not change the scope or types of services offered by BGE, said spokeswoman Chrissy Nizer.

Thomas Hamlin, an analyst at Richmond investment bank Wachovia Securities LLC, predicted that Constellation would add value to FPL’s energy portfolio.

Mr. Hamlin, who advised investors to hold FPL stock and buy Constellation shares, does not own stock in either company. But Wachovia Securities is seeking business with both companies.

The combined company would be able to generate about 42,500 megawatts of power from nuclear, wind, coal and gas-powered sources. That’s enough for about 34 million average U.S. homes, based on Energy Department estimates.

The deal at the earliest would be completed in the beginning of 2007, Mr. Worms said.

“It takes time to go through the regulatory process,” he said, rating FPL as “outperform” and Constellation as “neutral.” The purchase would require approval from regulators in Maryland and Florida and the Federal Energy Regulatory Commission.

Mr. Worms owns a few hundred shares of FPL but no Constellation stock. Harris Nesbitt has a banking relationship with both companies.

• This article is based in part on wire service reports.

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