- The Washington Times - Monday, December 19, 2005

Florida’s largest utility yesterday said it would buy Baltimore gas and electric utility Constellation Energy Group Inc. for about $11 billion, creating the nation’s largest power seller.

The deal, which is subject to regulatory and shareholder approval, would create a utility conglomerate stretching from Florida to Maine with annual revenue of $27 billion.

The combined company would own seven nuclear power plants, generate more than 45,000 megawatts of capacity and serve electricity and gas to more than 6 million customers.

“This historic transaction will create growth potential for the combined enterprise that exceeds what our two companies could have achieved separately,” said Lewis Hay III, Florida Power & Light (FPL) chairman, president and chief executive officer.

Mr. Hay would become CEO of the merged company, while Constellation Chairman, President and CEO Mayo Shattuck III would be chairman and head the unregulated power business.

The new company, which would be called Constellation Energy, would have dual headquarters in Juno, Fla., and Baltimore for 21,750 employees.

Although some jobs may be cut, Mr. Shattuck said he expected overall employment to grow as a result of the deal and said any job losses would be through retirements and attrition.

FPL has more generation capacity and less peak demand, while Constellation, a major power trader, is in the opposite position, executives from the two companies told investors in a conference call.

Shares of Constellation, which owns Baltimore Gas and Electric Co. (BGE), fell $2.52 yesterday to $59.10 on the New York Stock Exchange. Constellation’s stock jumped 10 percent last week on reports of the potential deal. FPL’s stock on the same exchange dropped 19 cents to $42.76.

The acquisition, which was rumored last week, is the biggest U.S. utility acquisition filed this year.

The deal is not expected to affect power rates. But BGE is considering filing for an electricity rate increase once a five-year cap on the rate ends in summer 2006, said spokesman Larry McDonnell. The company last raised rates in 1993.

The deal is expected to be completed in nine to 12 months, once it has received approval from regulatory agencies in Florida and Maryland, the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.

Although analysts favorably viewed the deal, analyst Shelby Tucker said Constellation shares may have been sold too cheaply.

Under the all-stock deal, each Constellation share will become 1.444 shares of the combined company.

“That being said, the level of accretion should lift the value of FPL shares, which will directly benefit Constellation’s shareholders,” said Mr. Tucker with Banc of America Securities LLC.

Mr. Tucker, who rated FPL as “neutral” and Constellation a “buy,” does not own any company shares, but Banc of America Securities is seeking business with the companies.

Paul Ridzon, an analyst with Keybanc Capital Markets in Cleveland, said other power companies, such as Dominion Resources Inc. in Richmond, could be the next utility buyers.

“We would imagine that other utilities are eyeing this deal closely,” he said.

He advised investors to buy FPL shares and hold their Constellation stock. Mr. Ridzon does not own any company shares, but Keybanc is seeking a banking relationship with both companies.

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