Constellation repays Buffett $1 billion, interest

January 15, 2009|By Hanah Cho | Hanah Cho,

Constellation Energy Group repaid a $1 billion emergency loan this week, plus $5 million in interest, to Warren Buffett's MidAmerican Energy Holdings Co., according to documents filed yesterday with the Securities and Exchange Commission.

Last month, Constellation terminated a $4.7 billion takeover deal with MidAmerican, which also had provided the immediate cash infusion in mid-September. At the time, CEG was teetering near bankruptcy amid a liquidity crisis in its commodities-trading business.

Instead, Constellation entered into a proposed nuclear venture with France's largest utility, allowing it to remain an independent, publicly traded Baltimore company. Electricite de France agreed to pay $4.5 billion for half of Constellation's nuclear power business.

Constellation said the loan was repaid Monday. Constellation's net available liquidity, factoring in the repayment, was $2.4 billion as of Dec. 31, according to the filing.

In terminating the deal with Iowa-based MidAmerican, Constellation agreed to pay Buffett $593 million in cash, to give him 10 percent of the company's stock and to repay the $1 billion emergency loan at a 14 percent interest rate.

The company is selling off or winding down much of the commodities-trading operation that was the source of its credit troubles to focus more on its traditional energy business.

Last year, Constellation put its Houston-based natural gas trading business on the market as well as its international coal and freight business and its "upstream" gas portfolio.

"We continue to progress with our plans to divest our London-based international commodities business and our Houston-based gas marketing and trading business," Constellation spokesman Rob Gould said yesterday, noting that the company is also pursuing the sale of its "upstream" gas portfolio, subject to market conditions.

Constellation and EDF said they expect to receive regulatory approvals, including from the Nuclear Regulatory Commission, in six to nine months. Gould said the company is working on regulatory filings now.

Meanwhile, the Maryland Public Service Commission is reviewing whether state regulators have the authority to review Constellation's proposed partnership with EDF.

The company has complied with the panel's request to submit documents related to the transaction, Gould said.

The Maryland Energy Administration and the state attorney general's office believe the panel has jurisdiction under a state law granting it authority to review transactions that give a person substantial influence over regulated utilities.

Constellation is the parent company of Baltimore Gas & Electric Co., the area's primary electric and gas utility.

Shares of Constellation lost 45 cents to close at $26.90 yesterday.


What Warren Buffett received with the deal's termination:

* $175 million "kill" fee.

* Nearly 10 percent of Constellation stock, worth about $460 million.

* $418 million in cash for shares that cannot be converted because of regulatory restrictions.

* Repayment of a $1 billion loan with 14 percent interest.

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