Friday, April 24, 2009

America's Climate & Energy Depend on Constellation Energy

If a new nuclear power plant will be built, it will be built by the partnership between Constellation Energy (parent to Baltimore Gas & Electric) and Electricite de France (EdF). Last year, Electricite de France, the energy arm of the French government, bought a 49.9 percent stake in Constellation's nuclear power division. A foreign company cannot own outright an American nuclear power plant. So how does this lead to a scenario whereby Constellation Energy is the savior of America's climate and energy future you might ask? Well nuclear power has to lead the fight to mitigate global climate change, with wind and solar bringing up the rear. Due to a weakened Wall Street and significant increase in the cost of financing a nuke, the French collaboration with Constellation Energy is the best chance for a new nuke to be built in the U.S. within the next seven years.

The Center has been very protective of the proposed third reactor at the Calvert Cliffs site on the Chesapeake Bay in Maryland. We opposed Warren Buffett's Berkshire Hathaway takover of Constellation because we knew Buffet would not authorize the construction of a new nuclear plant at that site or at the Nine Mile Point site in upstate New York. The switch from acceptance of Buffet's bid to acceptance of the EdF deal cost shareholders more than a million dollars in merger termination costs. But we think the cost was well worth it.

An untimely part of the French deal was a provision guaranteeing 120 senior managers at Constellation $32 million in bonuses meant to keep them on the job at the same time the news came that the company posted a $1.3 billion loss for 2008, cut its dividend, laid off hundreds of employees and pushed through a local rate increase. In response to the criticisms, Constellation's directors fired half of the top management team, including the chief financial officer in response to this debacle. Fortunately, Constellation has hired a climate change visionary and expert in James Connaughton, former chairman of the Counsel on Environmental Quality, as an executive vice president. (Wash Post, 4/24/09)

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