Constellation Chairman and Chief Executive Mayo A. Shattuck… (Baltimore Sun photo by Jed…)
After overcoming a rocky year that included a near-bankruptcy and a political and regulatory minefield to close a nuclear joint venture, Constellation Energy Group is focused on growing its alternative energy resources, reviving a nuclear industry in the United States and acquiring more fossil-fuel plants.
In a 45-minute interview Wednesday at his corner office overlooking the Inner Harbor, Constellation Chairman and Chief Executive Mayo A. Shattuck III said the Baltimore company has moved past the financial troubles that had threatened its very existence last fall.
While Shattuck reflected on the challenges of the past year - calling it the "most difficult business challenge that I've ever experienced" - he focused on Constellation's future.
Constellation is in solid financial shape, having reported a third-quarter profit of $137.6 million, shored up its balance sheet and reduced its debt.
"We're in a much stronger position," Shattuck said. "We really are driving toward a balanced generation fleet, more inclusive of renewables, [and] obviously with the very keen interest in reviving the nuclear industry. So we've got a lot of significant growth drivers out there that I think are aligned with a lot of important constituents, inclusive of the environmentalists, inclusive of our state regulators and in the interest of the state generally and very much in the interest of our customers."
A big part of Constellation's long-term strategy involves expanding its renewable energy generation portfolio, Shattuck said. To that end, the company announced this week that it plans to develop one of the nation's largest solar photovoltaic facilities in Frederick County. It is also developing a $140 million, 70-megawatt wind facility in Western Maryland.
Constellation is also examining other types of "green" energy resources, such as bio-gas that might involve chicken litter, Shattuck said.
"This is a whole genre of stuff that I think will be imperative that our company have a strategic focus on," he said, noting there is consumer demand for such efforts.
Shattuck also sees nuclear energy as part of the demand for clean energy solutions.
"We're one of the few fleet operators in the United States for nuclear," he said. "So I think we felt for many years that it's incumbent upon us to attempt to put the things in place that could fuel its renaissance."
A proposed third nuclear reactor at Calvert Cliffs is seen as a potential impetus in revitalizing the industry. It's one of four projects being considered for a federal loan guarantee, a key to financing the unit. While other hurdles remain, including costs of the plant, Shattuck said Constellation and its French partner, Electricite de France, have made a "meaningful commitment" by spending $600 million so far to push the project forward.
At the same time, Constellation is just as committed to expanding its coal and natural gas generation fleet with plans to buy new plants, Shattuck said.
"Because the balance sheet is nicely restored and our credit ratings are stable, we have a billion in cash that ... we would deploy in the acquisition of plants going forward," he said.
A little more than a year ago, Shattuck was talking about a different kind of acquisition: the takeover of his own company.
Amid the financial sector meltdown, Constellation agreed to a shotgun takeover by billionaire investor Warren E. Buffett as it faced a severe cash shortage that pushed it to the edge of bankruptcy. But in an about-face, Constellation terminated its deal with Buffett to sell half of its nuclear power business to Electricite de France for $4.5 billion.
"We acted swiftly and authoritatively to stabilize the company while maintaining the option of realizing the right value of the company on behalf of our shareholders longer-term," he said. "We very much made the right decision, and it wasn't without a lot of hardships."
But the regulatory hurdle was long and often contentious, involving hearings before the Public Service Commission and behind-the-scenes settlement talks with Gov. Martin O'Malley, who sought concessions to benefit ratepayers of Constellation's regulated utility, Baltimore Gas & Electric Co.
O'Malley also wanted the company to limit executive compensation, contending that Shattuck would get a potential $87 million golden parachute triggered by a so-called change in control, such as the sale of the company, and Shattuck's termination. Since the EDF deal was not a sale, Shattuck was not eligible to receive any money because of the transaction.
Shattuck said he understood why his compensation became a matter of debate.
"Compensation became a big issue in the context of the collapse of the banks," he said. "It's a hot-button issue in an environment where it naturally strikes people as a contrast that leads to a lot of acrimony."