Constellation Energy Group said yesterday that Chief Executive Officer Mayo A. Shattuck III would waive $18 million in cash severance under the company's planned merger, though he still would be eligible for millions if the deal is approved by state regulators.
Under the plan, the company's Baltimore Gas and Electric Co. customers could receive a small break on their utility bills. But one lawmaker immediately criticized the proposal, characterizing any savings for ratepayers as "pennies."
Constellation and its buyer, Warren E. Buffett's MidAmerican Energy Holdings Co., outlined the benefits of the proposed $4.7 billion deal in documents filed late yesterday, making its case to the Maryland Public Service Commission. The deal is subject to approval by regulators and shareholders.
Baltimore-based Constellation agreed last month to sell itself for $26.50 a share as it faced a credit crisis. But some shareholders are upset that Constellation rejected a higher offer from its largest shareholder, Electricite de France. EDF, which offered $35 a share, decided this week not to submit a new offer. Shares of Constellation fell 27 cents, or 1.11 percent, to close at $24.06 yesterday.
Shattuck, whose $18 million severance would be triggered under the merger, has requested that Constellation donate that payment to the company's charitable foundation, a contribution that MidAmerican said it will match.
But Shattuck is still eligible for $10.9 million in previously owed incentive payments upon completion of the merger, according to the preliminary proxy filed yesterday with the Securities and Exchange Commission. And, in most circumstances, if he's terminated within two years after the merger closes, Shattuck would receive another $11.3 million in bonuses and a pension upgrade.
The proxy also discloses vivid new details about how MidAmerican rescued Constellation from what otherwise would have been a death spiral last month, including descriptions of a preparation for bankruptcy filing and the hard bargain driven by MidAmerican.
MidAmerican Chief Executive Officer Gregory Abel said its purchase of Constellation, if approved, would stabilize the company's troubled finances and also benefit BGE customers, the community and employees. He said in an interview that the proposed merger would allow BGE to reduce and delay planned increases in distribution rates for the utility's more than 1.2 million electric and 630,000 gas customers.
