Exelon To Purchase Constellation Energy Group

Exelon, the biggest U.S. operator of nuclear power plants agreed to purchase Constellation Energy Group Inc. (CEG) of Baltimore for about $7.9 billion in stock, giving the Chicago-based company stakes in five more reactors. Constellation’s nuclear assets will help Exelon boost profitability as environmental regulations increase costs for energy producers that own coal plants.

The purchase of Constellation, of Baltimore, Md., gives Exelon an interest in five more reactors at three sites: the two-unit Calvert Cliffs site in Maryland, the two-unit Nine Mile Point plant in New York and single-reactor R.E. Ginna plant in New York.

Constellation had sought permission from the Nuclear Regulatory Commission to build a giant new reactor at its existing Calvert Cliffs nuclear plant site in Maryland. Constellation originally chose an advanced reactor designed by French-based Areva Inc. for the project. But Constellation backed away from the project last year after determining that the costs associated with a loan guarantee from the Department of Energy carried too high a premium.

In November 2009, Constellation sold a 49% interest in its nuclear business to EDF Group, the big French-based utility company. It was accompanied by another agreement allowing Constellation's utility, Baltimore Gas & Electric Co., to purchase 85% to 90% of the power from the units to meet the needs of the utility's customers. Under a deal struck in 2010, the utility's purchase of power will drop to about half the nuclear output, after 2015, leaving a large amount that can be sold at market prices.

The takeover, which will mark the end of John Rowe’s 11-year stint as Exelon’s chief executive officer. Constellation Chief Executive Mayo Shattuck will be the executive chairman of the combined company, while Exelon Chief Operating Office Christopher Crane will be chief executive. (Bloomberg, 4/29/2011, WSJ, 4/28/2011)

Norris McDonald , John Rowe

The merger of Exelon and Constellation must be approved by the Maryland Public Service Commission, the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the New York Public Service Commission and the companies' shareholders.