October 31, 2009|By Hanah Cho | Hanah Cho,Hanah.cho@baltsun.com
Maryland regulators approved Constellation Energy Group's nuclear joint venture with a French utility Friday, adding conditions - including a one-time $100 credit for each Baltimore Gas and Electric Co. customer - that fell short of concessions Gov. Martin O'Malley had sought for the deal.
Besides imposing the residential ratepayer credits totaling $110.5 million, the Public Service Commission placed terms on the transaction that would protect BGE from future financial troubles of its parent company. Among them: Constellation must make a $250 million cash infusion into BGE by June 30 to strengthen the utility and protect consumers.
"With the conditions we order below, the transaction is consistent with the public interest, convenience and necessity, with benefits and no harm to consumers, and the companies are cleared to proceed to closing," the PSC said in an extensive 54-page ruling on Constellation's deal to sell half its nuclear power business to Paris-based Electricite de France.
PSC approval was the last regulatory hurdle in the $4.5 billion deal struck in December; the companies have until Friday to tell the panel whether they plan to close the transaction. The companies, which had argued that imposing costly conditions could scuttle the deal, had little to say Friday except that they were reviewing the order.
Constellation Chairman and CEO Mayo A. Shattuck III said at a news conference about a new BGE energy conservation program that his company will review the order over the weekend and expects to meet the PSC's deadline. Earlier Friday, before the ruling's release, he said Constellation would be ready to close the deal in two weeks if the PSC's order were reasonable.
Constellation and EDF extended the deadline to close the deal from Oct. 30 to Nov. 16, according to regulatory documents filed late Friday.
Paul B. Fremont, an analyst with New York investment bank Jefferies & Co., predicted that Constellation would proceed with the deal after concluding the conditions are acceptable.
In a statement, O'Malley called the PSC's decision "fair and reasonable."
O'Malley, a Democrat, later said at a news conference that he's "not terribly worried" the conditions would cause the companies to walk away from the deal. Constellation anticipated many of the conditions "even as they battled this case through the process," he said.
He also commended the PSC for handling the case in a "fair, reasonable and expedited way" and said the commission's review has resulted in a "much better result for consumers than otherwise would have come about."
"It's always a victory when we're able to make our government work in such a way that consumers get a better and fairer shake," O'Malley said. "This could be a victory all around, and I hope that all the stakeholders see it as an opportunity to move forward."
If the deal closes, Constellation can move past financial troubles that pushed it to the edge of bankruptcy amid last fall's financial sector meltdown. Forced by a severe cash shortage to find a partner, Constellation initially agreed to a takeover by billionaire investor Warren Buffett but switched to the deal with EDF.
Constellation is now in better financial shape after shedding most of its risky commodities business, which had been the source of its problem. The company reported Friday a third-quarter profit of $137.6 million, or 69 cents per diluted share. In that period last year, the company lost $225.7 million, or $1.27 per diluted share, because of write-downs in its commodities operations.
Since January, Constellation has been working to close the transaction with EDF but has been hit with legal battles, delays and opposition by anti-nuclear groups.
Even as the PSC conducted hearings on the joint venture, Constellation was under pressure from O'Malley to provide one-time credits that could amount to more than $200 per household, as well as make other concessions.
O'Malley called for Constellation to contribute $50 million to $100 million to a program that helps lower-income residents pay their utility bills, and to establish measures putting BGE on stronger financial footing. He also wanted the company to limit executive compensation, contending that Shattuck could get a payout of as much as $87 million - an amount that Constellation said would not be paid out under the EDF deal.
But the governor's behind-the-scenes settlement talks with the company went nowhere. This week, O'Malley backed regulatory approval of the deal for the first time - if an extensive list of conditions were met, including the one-time rate credits he had proposed.
The PSC did not address Shattuck's executive compensation, saying its role is to focus on BGE and ratepayers. And it did not order Constellation to contribute to the state's energy assistance program.
