Constellation Energy Group, one of only two Fortune 500 companies in the region, said yesterday that it is in active discussions with "potential strategic partners," a process that could include the sale of the entire company, to avert a credit squeeze in its energy-trading business.
One possible buyer is Constellation's largest shareholder, French power company Electricite de France International, according to a Morningstar analyst.
Earlier this month, Paris-based EDF nearly doubled its stake in Constellation to 9.5 percent. The two companies formed a joint venture to develop and deploy new nuclear power plants in the United States and Canada.
Officials for Constellation, which owns Baltimore Gas and Electric Co., declined to comment yesterday. An EDF spokeswoman would not comment when asked whether it would buy Constellation or increase its stake.
Shares in Baltimore-based Constellation declined even further yesterday, losing 19.47 percent, or $5.99, to $24.77. The stock has lost nearly 60 percent of its value since Monday and 76 percent since the beginning of the year. Yesterday was the third straight day the company's shares fell by double-digit percentages.
Constellation's plummeting value reflects the degree to which investors have lost faith in its commodities-trading business, which relies heavily on its ability to get financing, amid the financial market turmoil. As a result, credit rating agency Standard & Poor's said Constellation is facing an "acute crisis of confidence."
One analyst compared Constellation's credit concerns to Enron, the Houston energy company that quickly sank into oblivion after trading partners refused to renew its borrowing privileges.
"By no means are we saying that Constellation has engaged in any of the illegal and unethical practices in which Enron partook, but a similar 'run on the bank' scenario, although less likely, could unfold here," Morningstar analyst Paul Justice wrote in a report yesterday.
In July, Constellation reported a 47 percent increase in its second-quarter profit, buoyed by its gas and electricity trading business.
Constellation said in a statement yesterday that it hired Morgan Stanley and UBS as advisers to evaluate strategic alternatives, which could include options beyond an outright sale, such as selling other parts of the business and issuing equity.
