Constellation offers its stake in Calvert Cliffs to French partner for $1

Constellation Energy Group offered Friday to sell its half-stake in the proposed third nuclear reactor at Calvert Cliffs to its French partner for $1, a move that would allow EDF Group to pursue the Maryland project alone but would end the Baltimore company's business in U.S. nuclear development.

Constellation's proposal is the latest exchange between the two partners, whose strained relationship became even more so Oct. 8 when Constellation pulled out of negotiations with Obama administration officials over a federal loan guarantee deemed crucial to the $9.6 billion project.

Constellation officials said the terms offered by Washington were too expensive and burdensome. EDF said it was shocked by what it called Constellation's unilateral decision, while disappointed officials, including Gov. Martin O'Malley and House Majority Leader Steny H. Hoyer of Maryland, said they would work to revive the project.

"While there may be disagreements between our companies, I still believe strongly that we share the same dream for [Calvert Cliffs 3]," Michael Wallace, chairman of Constellation's nuclear energy group, said in a letter Friday to Paris-based EDF. "The offer I have outlined today would keep that dream alive."

Constellation said it was willing to offer its UniStar interest, which includes the land for the third reactor, at "well below market value" or for $1 in exchange for $117 million in reimbursement for development and design costs. Constellation said the offer represented a "small fraction" of the $817 million that EDF and Constellation had spent on the project.

In an attempt to save plans for the endeavor, EDF offered Wednesday to buy out Constellation's interest in UniStar, the companies' nuclear development venture. Later, according to the proposal, EDF would seek another U.S. partner to replace Constellation. Federal law prohibits full ownership or control of a U.S. nuclear plant by a foreign entity.

But EDF's proposal came with a condition: that Constellation not exercise an option to sell 12 nonnuclear power plants to the French company for up to $2 billion, a price that analysts say could be $1 billion more than the plants are worth. The so-called put option, which expires Dec. 31, was part of the EDF deal that rescued Constellation from a financial crisis two years ago. It has been a source of contention between the companies in recent months.

In a letter Wednesday to Constellation, EDF warned that the resulting litigation if Constellation exercised the option would delay the Calvert Cliffs project.

But Constellation said Friday that its buyout proposal was separate from the companies' dispute and that it should not be used to "hold the prospect of [Calvert Cliffs 3] hostage."

EDF, in a statement Friday, said it was reviewing Constellation's letter.

In abandoning negotiations for the loan guarantee, Constellation said the $880 million cost of obtaining the guarantee was too high and other conditions too burdensome.

"It was an extremely disappointing outcome and yet we always knew — and shared with our stakeholders — that Constellation Energy's new nuclear ambitions must be guided by the risks and costs associated with CC3," Wallace said in the letter to Thomas Piquemal, EDF's executive vice president of finance.

Constellation had championed the proposed third reactor at Calvert Cliffs as an early step in a U.S. nuclear renaissance and hailed the thousands of construction jobs and carbon-free electricity the plant would produce. The company has no other nuclear project.

It joined with EDF, the world's largest owner of nuclear power plants, to create UniStar in 2007. EDF hoped to establish a foothold in the United States through Calvert Cliffs.

The companies' relationship grew when the French company bailed out Constellation when it faced a financial crisis two years ago. EDF bought nearly half of the Baltimore company's existing nuclear plants for $4.5 billion. EDF is now Constellation's largest shareholder.

Separately Friday, O'Malley and Hoyer, along with Sens. Barbara A. Mikulski and Benjamin L. Cardin, all Maryland Democrats, sent a letter to the chief executives of Constellation and EDF to urge them to "engage in active negotiations immediately to develop a financing and corporate arrangement that allows UniStar to accept a conditional loan guarantee commitment and proceed with the development of Calvert Cliffs III."

O'Malley spokesman Shaun Adamec said the recent discussions between Constellation and EDF signaled that the two companies were "still at the table together, and that's encouraging for the future of the project and the jobs that are associated with it."

O'Malley's election opponent, Republican former Gov. Robert L. Ehrlich Jr., who has blamed O'Malley for the project's stalling, sent a letter Friday to the U.S. Office of Management and Budget, urging the agency to resume negotiations over Calvert Cliffs.

"I remain deeply troubled by the many delays that have beset the Calvert Cliffs project and the O'Malley administration's inability to broker an agreement in the best interests of Maryland's economic and energy future," Ehrlich said in a news release.

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