Nobody knows better than Mayo Shattuck, the former investment banker, that economic value is determined by future cash flows.
By that measure, Baltimore just went downmarket, no matter how hard he and other executives try to sell Constellation Energy's sale to Exelon Corp. as a great thing for the city.
The salaries paid, contractors hired, professionals retained, buildings leased and people employed in Maryland will be substantially less under this deal than if Constellation had stayed anchored in Baltimore and grown on its own.
The deal announced Thursday is a "net jobs positive for Maryland," adding to the 7,500 people who work for the company in the state now, Constellation CEO Shattuck said at a news conference Thursday.
But more than 500 of the positions he's counting are temporary, associated with building renewable energy facilities and a new office center. Others are future jobs, dependent on growth in the divisions left to Baltimore only after probably hundreds of Constellation's corporate jobs disappear.
The city would be the headquarters of the combined companies' wind and solar energy division, "a whole new growth engine for Baltimore," Exelon CEO John Rowe told reporters at the news conference. It'll also be the headquarters for selling the company's power to wholesale and retail customers.
But the real headquarters, the corporate one, would move to Chicago, shifting influence, prestige and yet another Fortune 500 CEO position from Maryland. When corporate headquarters merge, payroll, marketing, accounting, human resources and executive support are all vulnerable. A vague reference by Rowe to "overlap" between the companies means people will lose jobs in the worst economy in decades.
Nobody will be laid off from Constellation subsidiary Baltimore Gas & Electric for two years after the buyout is completed, officials promised.
But after that? Because they're needed to serve local customers, utility employees are generally left unmolested when power companies merge. At the Pennsylvania border, however, BGE's territory nearly touches that of PECO, Exelon's Philadelphia utility. With the companies so close, some jobs might eventually be combined.
There will be no changes at Constellation Energy Nuclear Group, the company's joint venture with the French EDF Group, which employs about 1,200 in Maryland, officials said.
But what about later? Already analysts are speculating that there will be a deal to buy out the French and consolidate CENG with Exelon. It doesn't make sense for a company split into two to run the biggest nuclear-generation fleet in the country.
Including a $100 credit for every BGE household — for a total of more than $100 million in rebates — plus $50 million invested in renewable energy and $100 million of charitable giving over a decade, Maryland will receive more than $250 million in benefits from the deal, Constellation officials say.
Great. But shareholders in the combined companies will get that amount in cost savings from the merger every year. Forever.
There couldn't be a worse time to do this deal for companies worried about public opinion, which Constellation and Exelon clearly are.
Two decades of American corporate consolidation have enriched shareholders and executives but returned hardly anything to workers. The Dow Jones Industrial Average is heading toward 13,000, but unemployment is 8.8 percent.
Metro Baltimore is becoming a serial corporate headquarters loser. Even Constellation shareholders aren't doing that well through the Exelon deal. They'll get maybe $38 a share in Exelon stock. Many remember when Constellation sold for $100. Shattuck has delivered extremely mediocre results in his decade at the helm.
So Baltimore becomes the storefront for selling Exelon's electricity and gas.
So Shattuck forgoes the usual merger-related CEO windfall, although he gets an accelerated $20 million that he would have eventually received anyway. And he'll surely do quite nicely in his new job as Exelon's executive chairman.
So Rowe pledges to hold Exelon's annual shareholder meeting in Baltimore. Exelon will continue local charitable giving, he says. It'll be Baltimore's "hometown company," he says.
Yeah, and reporting to bosses hundreds of miles away. Just like Baltimore's other hometown companies.